In this paper, possible factors affecting the second-pass regression results in capital asset pricing are investigated in detail. First, the true functional form used to test the risk-return relation is determined by using Box and Cox's [2] generalized functional form technique. Secondly, Box and Cox's residual analysis and transformation technique are used to show the importance of the skewness effect in capital asset pricing. Finally, some other factors affecting the results of second-pass regression coefficient in capital asset pricing also are explored. From these analyses, it is found that the functional form, the skewness effect, and the change of market condition are the most important factors in affecting the empirical conclusions in testing the bias of composite performance measures and the risk-return relation.

Hui-shyong Chang, Cheng F. Lee, Using Pooled Time-Series and Cross-Section Data to Test the Firm and Time Effects in Financial Analyses, The Journal of Financial and Quantitative Analysis, Vol. 12, No. 3 (Sep., 1977), pp. 457-471

Reviews the book 'International Accounting and Financial Reporting,' by Norlin G. Rueschhoff.

Cheng F. Lee, Manak Gupta, An Inter-Temproal Approach to the Optimization of Dividend Policy with Pre- Determined Investment: A Further Comment, The Journal of Finance, Vol. 32, No. 4 (Sep., 1977), pp. 1358-1361