Do changes in stock market indicators, such as the short interest ratio, signal changes in stock prices? Popular stock market lore and numerous books and articles support the worth of “technical” analysis. On the other hand, to the extent that stock prices follow a random walk, technical indicators would seem to be of no value. The two positions can be reconciled to a degree by realizing that a variable can follow a random walk with respect to its own sequence and still be successfully predicated by some other variable(s). Furthermore, successful predications of stock prices can be made on the basis of available information, if that information is used in some unique manner that has not been fully developed by other market participants.

The attempt to incorporate securities market imperfections other than proportional taxes within a mean-variance security valuation context has met with modest success. Lintner [5], however, has recently considered imperfections by the device of segmented markets. His paper has motivated the following taxonomy. Securities markets are defined as weakly segmented if some of the securities in at least one market are available to some investors but not to others, partially segmented if the sets containing both investors and available securities in each market are disjoint, and completely segmented if additionally the sets of firms in each market are disjoint. Segmented markets effectively relax the separation property of mean-variance equilibrium models (i.e., all investors, irrespective of differences in present wealth or preferences, divide their wealth between the same two mutual funds; one is risk-free and the other is the market portfolio of risky securities). This property unfortunately implies that each investor must hold a portion of every available risky security. This is empirically unrealistic, primarily due to restrictions on borrowing and shorting and scale economies in security analysis and brokerage. Moreover, even in the absence of these complications, ownership of nonmarketable assets, nonhomogeneous beliefs, or breakdown of the separation property due to tastes or nonnormality will motivate individuals to hold different risky portfolios. The device of segmented markets embodies in extreme form these obstacles to diversification and portfolio similarity.

Under the assumption that individuals are single-period maximizers of the expected utility of their future wealth, this essay extends the mean-variance security valuation model developed by Sharpe [10], Lintner [4, 5, and 6], and Mossin [7 and 8] to a general parameter-preference model, with and without the simplifications of homogeneous subjective probabilities and the existence of a risk-free security. Results with quadratic and cubic utility are developed as special cases.

Recent research focused on the market for first public offerings of common stock has indicated that investors who purchase new issues at the offering price will quickly achieve relatively large systematic profits. This is attributable to either the inability or the reluctance of investment bankers to reoffer the shares in which they deal at market-clearing prices. This paper examines factors that influence investment bankers in their pricing decisions and subsequently determine the short-run performance of new issues.

Journal Article Afriat and Revealed Preference Theory Get access W. E. Diewert W. E. Diewert University of British Columbia Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 40, Issue 3, July 1973, Pages 419–425, https://doi.org/10.2307/2296461 Published: 01 July 1973

Journal Article Monetary and Fiscal Policy in a World of Capital Mobility: A Reply Get access John E. Floyd John E. Floyd University of Toronto Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 40, Issue 2, April 1973, Pages 299–303, https://doi.org/10.2307/2296657 Published: 01 April 1973

Journal Article Missing Data in Econometric Estimation Get access E. G. Drettakis E. G. Drettakis University of Leeds Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 40, Issue 4, October 1973, Pages 537–552, https://doi.org/10.2307/2296587 Published: 01 October 1973

Journal Article A Note on the Generalized Production Function Get access Jorge E. F. Pol Jorge E. F. Pol University of Buenos Aires Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 40, Issue 1, January 1973, Pages 139–140, https://doi.org/10.2307/2296745 Published: 01 January 1973

[What can we say about the competitive equilibrium price system for an uncertain economy in which each risk concerns just one individual? Three interrelated concepts of equilibrium are considered. They show how and under which conditions the contingent price for a contract to deliver one unit of some good if some event occurs tends to be equal to the product of the sure price of the good and the probability of the event.]

[In this paper we generalize the family of single equation k-class estimators to systems of equations. The systems k-class estimator with k = 1 is the 3SLS estimator. After developing the asymptotic properties we introduce a further member of the systems k-class, the systems LVR estimator. A systems version of Basmann's identifiability test statistic is also considered.]