Considerable literature in the investment, growth, and financing of the corporation has developed in recent years. While theoretical studies in this area have contributed importantly to the understanding of the firm's time-optimal decision program, they have generally been limited in scope to the all-internally-funded firm and steady-state dynamics. The well-known analyses of Gordon ]7[ and Lintner ]13[ are typical of this restricted focus. Herein we relax these specializing conditions, both by permitting external equity as a financing alternative and by not a priori requiring the firm to make identical (earnings proportional) investment and financing decisions at every time instant such that it progresses only along a constant, exponentially growing earnings path.

Despite apparent implications of normative portfolio theory for portfolios that incorporate a wide variety of marketable security forms, most of the literature concerned with application or empirical testing of the theory has considered portfolios composed only of common stocks, cash, and the proverbial riskless bond. However, nonequity securities constitute a significant component of investors' total financial wealth, and broadly diversified securities portfolios are commonplace. The objectives of this paper are to examine the risk characteristics of 19 classes of long-term marketable securities, ranging from U.S. government bonds to speculative common stocks, and to explore some implications of these characteristics for diversification of actual securities portfolios. The first section presents some risk measures for these security classes which are derived from ex post holding period return data for the 18 years, 1951–1968. This section includes an appraisal of the efficacy of alternative approaches to the generation of the matrix of interrelationships among the returns of broad types of securities. The second section utilizes the ex post risk measures to explore the composition of minimum risk portfolios consisting of two types of marketable securities, and the final section considers the question of appropriate media for the efficient diversification of common stock portfolios.

An important issue in the financial literature concerns the conflict between the stochastic dominance (SD) and the mean-variance (EV) methods of choosing optimal portfolios of risky assets. Much of the recent theoretical and empirical work in portfolio analysis has been devoted to the extension and testing of the Markowitz two-moment model, in which it is assumed that either (a) decision makers have quadratic utility functions with negative second derivatives or (b) the probability functions are from some appropriate two-parameter family and the investor is risk averse.

The use of residuals, both mean and mean absolute, was found to be useful in capturing the impact of new quarterly earnings information on share prices. Our results seem to indicate that the market evaluates third quarter and annual earnings reports differentially from the first and second reports. This can perhaps be explained in part because the annual report, which is audited, contains year-end accounting adjustments. Furthermore, the third quarter report may be viewed as a harbinger of the annual report. Our results also indicate that the share prices of high growth companies adjust to earnings information differently than do the shares of medium and low growth firms. In total our results seem to be consistent with the “loose” form of the efficient markets hypothesis. This is because of the difficulty in predicting the signs of the mean residuals. Or alternatively, while we could observe significant changes in the absolute means, it was considerably more difficult to predict the direction of these changes as seen in the mean residuals. While the difficulty of predicting the direction of the residuals and the loss of statistical significance between trading days when days −1 and 0 in the group tests over all reports indicate support of market efficiency, it should be reemphasized that the market appears to take very long to react to the annual report — that is, the reaction seems to start even before the third quarter report.

Almost two decades ago, Markowitz [12] formulated the portfolio selection problem as a parametric quadratic programming problem. The crux of his formulation was the mean-variance assumption which asserted that a portfolio is efficient if (and only if): (1) it has less variance than any other feasible portfolio with the same return and (2) it has more return than any other feasible portfolio with the same variance.

In this study, an attempt is made to determine whether the profitability of a commercial bank is related to the bank's ownership-control status. Affiliated and unaffiliated commercial banks in the sample are found to be equiprofitable. Affiliation with a mutual savings bank does not generate differences in profits, total current operating revenues, or total current operating expenses between the two groups of commercial banks. Furthermore, the marginal net earnings or returns on the individual deposit types are the same for the two groups of banks.

The two groups of banks have extreme differences in their holdings of time and savings deposits and real estate loans. These differences between equiprofitable banks require further analysis. The affiliated commercial banks have significantly larger percentages of their total assets in nonearning assets and lower proportions in loans. The affiliated banks also have larger proportions of their deposits in the less costly demand deposits than do the unaffiliated banks. These results indicate that affiliated banks would have both lower revenues and expenses than do unaffiliated commercial banks, ceteris paribus. However, affiliated banks have larger proportions of their portfolios in the greater income-producing consumer and commercial loans.

In conclusion, profitability of the commercial banks in the sample is not affected by the banks' control status. The commercial banks controlled by mutual savings banks are as profitable as banks controlled by management or “independent” owners. However, the control status does effect significant differences in the balance sheet and income statement accounts. While many of these distinctions may result from differences in the banks' deposit structures, these differences themselves are consequences of affiliation.

A considerable amount of scholarly attention has been focused on the area of banking structure. There have been a number of studies of banking costs under differing market structures, with the goal of defining an economically “optimal” banking structure. A second major body of research has been directed at identifying the impact of given market structures on performance variables. Finally, a third group of analyses has sought an explanation of the process by which a specific structural phenomenon in banking develops and matures. It is within this third broad category of banking structure research that the results reported in this paper may be classified.

Solving capital budgeting problems with linear and integer programming has been part of the finance literature for some time [21, 22, 23, 7, 14, and 18]. Capital budgeting problems have unique properties that distinguish them from other integer linear problems discussed in the mathematical programming literature. Capital budgeting problems generally have the following characteristics: (1) the matrix tends to be rectangular with more variables than constraints; (2) they are all maximization problems with ≤ constraints and nonnegativity conditions in the general form 0≤xi≤1 in the case of linear programming and xi = 0, 1 in the case of integer problems; and (3) there are often mutually exclusive projects among the variables. The purposes of this note are to illustrate some computational experience using existing integer algorithms to solve a set of capital budgeting problems and to begin to catalog the performance of integer codes on financial problems.

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 purpose of this comment is to make a comparison between the sufficient conditions of Soper [3] and of Norstrøm [2] for a unique internal rate of return (IRR). Such a condition is crucial for the implementation of a computer program, as for instance the one presented by Mao and Knoll [1] which makes use of Soper's condition. Therefore, it seems appropriate to investigate if one of the mentioned conditions is superior to the other, so that we could rely only on the more efficient one.

In [2]Sethi and Thompson illustrated the applications of the maximum principle to solve simple dynamic cash balance problems. In Section IV of that paper, we introduced the idea of penalty function to solve the cash balance problem with bounded state variables arising out of disallowing overdrafts and short selling. This resulted in the adjoint equations containing terms in the state variables x(t) and y(t). We then stated the need for solving a two-point boundary value problem.