Based on Markowitz's pioneering study [40], Sharpe [56] and Lintner [38] advanced the first positivist formulations of the capital asset pricing model (CAPM). Their models were subsequently refined by Mossin [45], Fama [15], Black [1], and others. Even though the CAPM has been studied extensively, it has not been empirically validated. According to Roll [48], the CAPM cannot be tested in an unambiguous fashion because of a number of intractable measurement and computational difficulties, and the joint nature of the hypotheses to be tested.

The process of security price adjustment to the release of new information has long held the interest of the finance profession, both in academics and in practice. The efficiency of financial markets in reflecting new information significantly impacts the allocation of capital and income within the markets1 and, consequently, can affect social welfare. Thus, public, business, and investment policies are all related to an understanding of the functioning of security markets and their utilization of information. As a result, a significant body of economic research has considered the impact of information upon security markets under a number of alternative market structures. In this paper, we attempt to contribute to this literature by extending previous research in the two related areas of speculation and information dissemination.

The specification of a statistical distribution which accurately models the behavior of stock returns continues to be a salient issue in financial economics. With the introduction of arithmetic and geometric Brownian motion models, much attention has recently focused on a Poisson mixture of distributions as an appropriate specification of stock returns. For example, see [12], [3], [8], [10], [5], and [1]. Consistent with empirical evidence, these models yield leptokurtic security return distributions and, furthermore, the specification has much economic intuition. In particular, one may always decompose the total change in stock price into “normal” and “abnormal” components. The “normal” change may be due to variation in capitalization rates, a temporary imbalance between supply and demand, or the receipt of any other information which causes marginal price changes. This component is modelled as a lognormal diffusion process. The “abnormal” change is due to the receipt of any information which causes a more than marginal change in the price of the stock and is usually modeled as a Poisson process.

Commercial banks have been the subjects of a large body of empirical research employing regression and econometric models and discriminant analysis. The purpose of this paper is to empirically identify and describe relationships, including hedging behavior, between the asset side and the liability/capital side of the balance sheets of a cross-section of large U.S. banks. Canonical correlation analysis is the statistical technique that is employed. Unlike regression analysis which explains the behavior of a single dependent variable as a function of a set of independent variables, canonical correlation analysis relates two sets of variables. In the present case, one set of variables is the composition of the lefthand side of the balance sheet and the other set is the right-hand side. The variables used in this study are asset and liability/capital categories expressed as a proportion of total bank assets (i.e., a percentage breakdown of the balance sheet or a common size statement). These proportions are used in lieu of the more usual financial ratios and no information exogenous to the bank is employed.

Black and Scholes [1] derived the pricing equation for a European put when the stock price follows geometric Brownian motion. For this same case, Merton [5] derived the pricing equation for an American put with infinite time to maturity. Brennan and Schwartz [2], Rubinstein and Cox [7], and Parkinson [6] have developed numerical solutions for the price of an American put. Numerical solutions are expensive and do not provide much intuition. Naturally, an analytic solution would be much preferred; unfortunately, pricing the American put requires solving a formidable and presumably intractable boundary value problem.

On March 28, 1979, failure occurred in one of the two nuclear reactors at the Three Mile Island (TMI) nuclear power generation facility owned by General Public Utilities (GPU). This nuclear “accident” was the first of its type in the United States, and much anecdotal evidence suggests that the accident intensified public concern and increased regulatory activity. Since this event, several proposed nuclear plants have been cancelled; safety rules have been tightened; certification (by the Nuclear Regulatory Commission) of newly completed nuclear plants has been delayed; and the pressure to curtail or ban the use of nuclear technology continues.

In their seminal paper, Modigliani and Miller [11], [12] demonstrate that if capital markets are perfect and investment policy is held constant, the market value of the firm is independent of its financial decisions. Furthermore, if capital markets are perfect, stockholders have incentive to choose the investment policy which maximizes the market value of the firm (see [6]). Motivated by this assumption, the firm has been viewed as a “black box;” namely, as one homogeneous unit whose clear objective is to maximize its market value. However, in a growing body of recent literature (see [1], [2], [7], [9], [13], and [14]), researchers recognize that the firm in an “imperfect” capital market is a collection of groups whose interests can, and do, conflict. Jensen and Meckling [9] study the roles of three important groups—the owner-manager, the stockholders, and the bondholders—focusing on the potential costs resulting from divergence of interests among them. They provide a theory of optimal capital structure in terms of reducing the costs of these conflicts.

The late nineteenth century was a critical epoch in the history of French industry. During this period, many French industrialists adopted, for the first time, entrepreneurial attitudes towards business. At the same time, however, traditional skilled trades continued to play an important role in the national economy. In this article, Professor Weissbach explores the attitudes and practices of nineteenth-century entrepreneurs in the French luxury trade. By focusing specifically on the Patronage industriel des enfants de l'ébénisterie—an organization established to assist, educate, and moralize children apprentices in the French furniture industry—Weissbach reveals that traditional and entrepreneurial attitudes and practices coexisted throughout the nineteenth century.

In this suggestive essay, Professor Galambos surveys the large number of books and articles, published since 1970, that together point toward a new “organizational synthesis” in American history. Expanding upon an earlier, more tentative essay on the same subject published in the Autumn 1970 issue of the Business History Review, he contrasts the widely disparate postures adopted in recent years by historians studying organizational behavior. His survey reveals a rich diversity of opinion, less reliant than was previous scholarship upon abstractions drawn from the social sciences. This diversity of opinion, Galambos concludes, provides the organizational synthesis with much of its continued vitality, and makes possible “the kind of moral judgments that have always characterized the best historical scholarship.”

By the 1920s the production of men's clothing was clearly divided into two sectors. The first consisted of a relative handful of large firms, technologically and organizationally sophisticated and engaged in the manufacture of better-quality garments. The “secondary sector” included a great many small and technically more primitive enterprises producing mainly lower-priced and lower-quality clothing. In this article, Dr. Fraser examines the development of the industry from the period following the Civil War through the post-World War I era in order to explain why this dualistic industrial structure emerged. In so doing, he draws on a thesis developed by Michael Piore and Alfred Chandler regarding the relationship between industrial organization and the structure of the market. Fraser argues that the expansion of the mass market does not necessarily lead to the concentration of production. It may, on the contrary, and especially in those cases where demand is particularly unstable, encourage the growth of a “secondary sector” whose minimal fixed investment makes it well-suited to handle the more variable component of demand.