In a recent article in this Journal, Jacob B. Michaelson and Robert C. Goshay (hereafter M-G) argue that the rule of maximizing share values does not adequately explain the portfolio selection practices of financial intermediaries. Moreover, M-G suggest that their analysis “has ramifications that reach far beyond financial intermediaries.” In particular, they state that “the asset holdings of conglomerate firms and the rationale for mergers may not be fully explicable in terms of maximizing behavior.”

Corporate Bond ratings, Credit rating, Financial ratios, Fisher model

Among the topics that have been subjected to intensive research by businessschool scholars over the past two decades, few have received more attention than those which collectively comprise the field of investments. What is more important, even fewer have witnessed the plethora of important research findings that has been forthcoming in the investments field. Indeed, it seems reasonable to argue that in recent years no other business field's research accomplishments have been either as impressive or as generally reinforcing.

This paper discusses the use of simulation as a means of studying the operations of securities markets. To place simulation's role in the proper context, Section I begins with a review of public policy, research, and teaching considerations that have combined in recent years to create a growing need to improve our understanding of the operations of these markets. Following this is a brief discussion of the limitations of traditional price theory models to meet this need. Section II demonstrates the significant, yet largely untapped, potential of simulation in this regard.

This paper examines the determinants of underwriters' spreads on tax exempt bond issues. In particular, it investigates the effect on spreads of differences in issue quality, term to maturity, and size. In addition, changing money market conditions and variations in the degree of competition among underwriters of tax exempts are analyzed for their influence on spread behavior. The relationships are studied for virtually all state bond issues sold between July 1, 1959 and December 31, 1965. The principal method of investigation is multiple regression analysis.

The article discusses some of the theoretical problems of the cash yield (CY) and prime rate index (PR) of convertible bonds. Since most convertible bonds currently being issued are offered to investors at prices around par, differences between cash yields and yields to maturity tend to be rather insignificant. Accounting Principles Board (APB), attempted to justify its choice of the CY/PR index on the grounds first that it represents a practical, simple and readily calculable basis for making decisions, and, second, that it has a sound empirical basis founded on a relatively high degree of correlation between the prime rate and alternative yield indices. In essence, the Board recommended an eminently operational procedure having several obvious, serious theoretical flaws and questionable predictive ability. The APB's decision to compare cash yields on risky securities with an essentially riskless rate not only creates the relative bias but also tends to reduce absolutely the probability that any convertible issue will be classified as the equivalent of common stock.

Reviews the book "The Financing of Small Business: A Current Assessment," edited by Irving Preffer.