Utilizing data from a single state, Professor Keehn examines a number of important hypotheses about banking history and the role of banking in the process of economic growth and development in America from the Civil War to the creation of the Federal Reserve System.

Ceteris paribus, investors prefer to purchase municipal bonds selling close to their par value. That is, investors are willing to purchase at the lowest yield a municipal bond alike in all respects to other municipal bonds, but with a coupon that permits it to be sold at or near its par value. Conversely, investors are willing to purchase municipal bonds with coupons that cause them to be sold at prices either greatly above or greatly below par only at penalty or premium yields relative to similar par bonds.

There have been many efforts in recent years to explain differences in the performance of commercial banks. Interest has centered on the extent to which changes in a selected group of indices of bank performance are related to the structure of banking markets and selected other factors thought to influence bank behavior. While various techniques have been used, the most common has been multiple linear regression. The measures of performance entered into the regression equations have included the price and quantity of bank services and bank profitability, while the explanatory variables have included, to name only a few, the one-, two-, or three-bank concentration ratio, the number of banks in the market, the existence of competition from nonbank financial institutions, bank costs, bank size, and proxies for the demand for banking services. Generalizations then have been made about the impact of market structure and other variables on bank performance, generalizations based upon the regression coefficients of the explanatory variables. The consensus appears to be that the demand for banking services and bank costs are significant determinants of the performance of individual commercial banks; market structure appears to be much less important. However, the conclusions are by no means unanimous.

Professor Melicher has conducted an interesting study of the effects of financial factors on beta coefficients and their variations. He reduced the perennial multicollinearity problem by using a factor analysis to screen the financial variables used in the statistical analysis. This study is another in the growing body of literature concerned with beta coefficients as measures of risk. My comments on this paper will consider separately (1) the research design (i.e., what the study directly covered), and (2) the inferences drawn by the author versus what the beta coefficients and their variation really do measure.

The study initially examined the immediate effects that conglomerate acquisitions have on the beta level of conglomerate and nonconglomerate acquiring firms. An analysis was then made of the long-run beta trends of firms that actively engage in conglomerate mergers. The results of the short-term comparative analysis have indicated that systematic risk behavior tends to be responsive in varying degrees to major conglomerate merger activity—with betas changing as a function of the combined premerger values and ρ2 measures showing improvement upon acquisition. At the same time, the regression results clearly revealed that the responsiveness of β to premerger marketrelated variables was considerably greater for the nonconglomerate firms. In contrast, the results of the comparative long-term analysis suggested that the differential effects of conglomerate merger activity on systematic risk are more of a marginal or limited nature. That is, unless the firm conducted extensive merger activity, the long-run performance of β and ρ2 indicated that conglomerate mergers have only contributed to increased absolute and relative systematic risk levels—the same pattern exhibited by the nonconglomerate, nonmerging sample.

The purpose of this research is to develop a model for determining the credit worthiness of commercial loan applicants in a particular troubled industrial sector of France. The model is developed with the assistance of Banque de France, which serves tne central banking function in a banking environment that has become increasingly competitive in recent years. The research assesses the combined potential of traditional financial statement analysis with several relatively modern statistical procedures to aid the commercial loan officer.

The theory of efficient capital markets suggests that if the capital markets are efficient, security prices can be assumed at any time to “fully reflect” all available information. Various forms of the model have been subjected to extensive empirical testing. The results of these tests have been such that in reviewing the literature on the theory Fama [3] states, “ … the evidence in support of the efficient markets model is extensive, and (somewhat uniquely in economics) contradictory evidence is sparse.” Most of the research, however, has been addressed to the question of whether prices “fully reflect” particular subsets of available information. The validity of these results depends on the extent to which the information in the subset used for testing captures the information actually impounded in prices.

Dr. Severn and Professor Laurence present an analysis of the relationships between direct investment, research and development (R & D), and profitability. Early in the paper it is stated that the goal is to provide an explanation for the assumed high internal rate of return on investment abroad. Later it is restated that the paper studies “the profitability of the firm as a whole, rather than its reported profit on foreign assets alone.” Consequently, no evidence is presented of a high return on investment abroad. Indeed, the references to rates of return in the first few pages should be preceded by the word “expected” because these are ex ante returns, whereas the returns analyzed elsewhere in the paper are ex post returns.

Professors Heathcotte and Apilado investigate a mechanical stock market trading rule which attempts to exploit the implications for market short-run price action contained in the leading indicators of business cycles found on the NBER 1966 Short List. The authors note that, in approaching peaks of business cycles, turns in all of the other leading indicators on the List except corporate profits occur before turns in the Standard and Poor's 500 Common Stock Index. Virtually the opposite is true relative to cyclical troughs, i.e., they nearly all lag the Index. The authors generalize, therefore, that turns in composite or diffusion indices constructed of the leading indicators might provide profitable signals to take appropriate positions (long or short) in the Standard and Poor's 500 stocks.

This study is concerned with the multiple-factor model of security returns, with its implications for a single-factor, market-index model applied to the same securities, and with statistical methods of estimating the parameters of a multiple-factor model and thereby operationalizing it. This part of the paper sets out the approach. The sequel will present the empirical results. The results show that there are highly significant extra-market components of covariance among security returns; moreover, these risk components are such that the loadings of individual security returns on the factors are determined by observable characteristics of the firm: income statement and balance sheet data, industry membership, and historical behavior of returns on the security. The results also show that the conventional security beta is a function of these same characteristics.

Consumer credit is an extremely significant factor in the economic expansion of the United States. Its annual compound rate of growth over the postwar period, averaging more than 15 percent, has considerably exceeded that of virtually all other economic indicators, and this expansion rate shows no sign of lessening. The importance of consumer credit is further emphasized by the fact that it accounts for nearly one-third the total liabilities of the household sector [11, p. 142]. And from the stand-point of financial institutions, consumer loans are vital because they are characteristically the most profitable investments in lenders' asset portfolios.

Although the effects of pure diversification and synergistic mergers on market valuation have been widely discussed and there have been a number of studies estimating. merger performance using the two-parameter model of Sharpe-Lintner, the investigation of the corporate determinants of beta is of recent vintage. A variation on this theme, namely whether merger activity is impounded into beta and its speed of being impounded, is the focus of the Joehnk-Nielsen (J-N) study.