Accounting choices, Investment decisions, Investors

The theory of efficient capital markets indicates that the prices in an efficient market fully reflect all available information. In much of the literature on efficient markets the term fully reflect is made operational with the assumption that the conditions for market equilibrium can be expressed as expected returns. Fama suggests that most expected return theories can be expressed in the following manner:(1) where — adopting Fama's notation — E is the expected value operator; Pjt is the price of security j at time t; Pj, t+1 is its price at t+1; is the one-period percentage return (Pj, t+1|Pjt); φt is a general symbol to represent whatever set of information is assumed to be fully reflected in the price at time t; and the tildes indicate that Pj, t+1 and rj, t+1 are random variables at t.

Journal Article Symposium: Time in Economic Life: Foreword Get access T. C. Schelling T. C. Schelling Guest Editor for the Symposium Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 87, Issue 4, November 1973, Pages 627–628, https://doi.org/10.2307/1882029 Published: 01 November 1973

[The properties of systems of investment equations derived under the hypothesis of present value maximization are investigated. The possibility that either the optimal time rate of change in some factor or the stationary level of some stock may increase with its own rental rate is shown to be consistent with the hypothesis in the case of more than one factor. A condition necessary for this result is that marginal products depend on the rates of which factor levels are justified.]

Introduces a series of articles published in the October 1973 issue of the journal "The Accounting Review."

Presents a comment on the American Accounting Association. Recognition received by the association as a participant in the new three-level organization responsible for establishing financial accounting standards; Need for the Association to establish formal procedures for the selection of members to fulfill the Association's designated responsibilities; Efforts being made to strengthen the Association's regional organizations in order to facilitate the increased participation.

[The limited information maximum likelihood and two-stage least squares estimates have the same asymptotic normal distribution; the ordinary least squares estimate has another asymptotic normal distribution. This paper considers more accurate approximations to the distributions of the so-called "k-class" estimates. An asymptotic expansion of the distribution of such an estimate is given in terms of an Edgeworth or Gram-Charlier series (of which the leading term is the normal distribution). The development also permits expression of the exact distribution in several forms. The distributions of the two-stage least squares and ordinary least squares estimates are transformed to doubly-noncentral F distributions. Numerical comparisons are made between the approximate distributions and exact distributions calculated by the second author.]