This paper develops a sequential model of the individual's economic decision problem under risk. On the basis of this model, optimal consumption, investment, and borrowing-lending strategies are obtained in closed form for a class of utility functions. For a subset of this class the optimal consumption strategy satisfies the permanent income hypothesis precisely. The optimal investment strategies have the property that the optimal mix of risky investments is independent of wealth, noncapital income, age, and impatience to consume. Necessary and sufficient conditions for long-run capital growth are also given.

A normative theory of capital budgeting requires determination of the correct cost of capital for the evaluation and selection of risky investment projects. Since different uses of funds within the firm may involve different degrees of uncertainty, the normative theory should take into account the effects of changes in the composition of the firm's portfolio of productive assets on its market valuation. The normative theory must therefore be based on a positive theory of market valuation. The objective of this paper is to develop and test an empirical specification of the positive theory.

With the rapid growth in various types of corporate combinations, many opportunities arise in which increased internal efficiency in the allocation of capital budgeting resources may be obtained. Although the resource-transfer methodology proposed in this paper is discussed within the context of a merger/acquisition environment, the operational analysis conveivably could be applied to multiproduct, multifirm, or multinational situations. This study examines an application in which a linear programming model can be used operationally as an analytical planning device (1) to obtain efficient capital budgets for the merged companies, and (2) to quantify the monetary value of potential gains in efficiency produced by a merger. Conceptually, the model assists management in searching for excess capacity in each company, efficiently combines scarce resources, selects an optimal project list for the merged company, and indicates what the composition of the new capital budget should be. In addition, a variable step function provides for multiplicative adjustments in common resource constraints. These adjustments might be positive (negative) if the combination results in a more than proportionate increase (decrease) in the availability of a scarce resource.

Deposit variability in banking has received substantial attention in recent empirical studies [1], [2], [3], [4], [5], and [7], Most of these efforts have been cross-section analyses of the determinants of variability. However, the impact of branching on deposit variability has not been tested in any of these studies. Wacht suggests that branching could reduce deposit variability substantially, especially if geographical dispersion could be achieved through relaxing interstate restrictions on branching [6]. In this paper, Wacht's suggestions will be subject to empirical testing for one thrift institution located in a major eastern metropolitan area. In Section I, the test methodology is presented. Data sources and empirical results are discussed in Section II, while the study is summarized and the implications for future research are discussed in Section III.

This now classic volume aims at a systematic presentation of the statistical methods used for the analysis of economic data. The properties of the various procedures are studied within the framework of theoretical stochastic models. Their relevance for inference on the economic phenomena is discussed at length. This third edition has been updated in many respects. Chapter 8 (Regression in Various Contexts) has been rewritten and now provides a full discussion of estimation in the linear models with a partially unknown covariance matrix, which introduces a systematic treatment of heteroscedasticity, random coefficients and composite errors. A new chapter has been added on simultaneous equation models that are non-linear with respect to the endogenous variables. The reader will also find new sections on shrunken estimators, on the choice of a model, on specification and estimation for distributed lag equations.

Journal Article Savings and Uncertainty Get access F. H. Hahn F. H. Hahn London School of Economics Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 37, Issue 1, January 1970, Pages 21–24, https://doi.org/10.2307/2296495 Published: 01 January 1970 Article history Received: 01 August 1968 Accepted: 01 April 1969 Published: 01 January 1970

Reviews the book "Management Information Systems for the Smaller Business."

The article responds to a comment presented by professor G. B. Mitchell regarding the methods used in evaluating financial leases. Mitchell's basic objection to the author's method of analysis is that he did not allow for the tax deductibility of interest and therefore did not obtain a correct after-tax implicit interest rate. It is because the method gives a before-tax rate which is directly comparable to the before-tax marginal cost of borrowing; it was never intended to yield an after-tax rate on the belief that managers are more accustomed to dealing with before-tax rates. Therefore the gross amount of the interest is allowed to flow through to the final cash flow, yielding a before-tax interest calculation. Unfortunately, it works exactly right only when the lease payments are identical to the equivalent loan repayments. If it were, then a simple investment involving a cash outflow in the first year followed by inflows for the rest of the project's life should be evaluated by discounting as a form of financing. Therefore it seems that, although Mitchell's objections to the internal rate of return are technically correct, they are substantially irrelevant to the problem of lease evaluation.