What were the ingredients for success for British merchants in the eighteenth-century trans-Atlantic trade? In the failure of Ralph Carr of Newcastle to market European goods in America during the 1750's, Professor Roberts personalizes an answer.

For seven years, the economic philosophy and political values of Secretary of Commerce Herbert Hoover challenged the structure, attitudes, and positions of a major, but poorly functioning, industry. This clash of wills and purposes, although colorful in itself, had broader significance in the evolution of government-business relationships in the United States. Professor Hawley argues that it was an important milestone in the conceptual development of “cooperative individualism and competitive co-operation.”

Following a review of the early period of British investment in Latin America (1822–1865) and a discussion of previous estimates of British capital exports to South and Central America before World War I, Professor Stone presents new and revised data concerning the composition and distribution of British holdings by amount, industry, and region.

Recent literature has witnessed the emergence of an impressive body of empirical evidence relating to the relationship which exists between successive security price changes. The great majority of this evidence has tended to support what has come to be known as the theory of random walks in security prices—that is, the theory that successive security price changes behave as independent random variables, which implies that knowledge of “the past history of a series of price changes cannot be used to predict future changes in any ‘meaningful’ way.”

The basic idea behind the random walk hypothesis is that in a free competitive market the price currently quoted for a particular good or service should reflect all of the information available to participants in the market that influence its present price. To the extent that future conditions of the demand or supply are currently known, their effect on the current price should be properly taken into account.

We shall investigate the problem of optimal exercising strategy for option holders for the case in which option holders are averse to risk. A model of stock price changes incorporating the Lognormal random walk assumption will be combined with a class of utility functions containing diminishing marginal utility of money. In general, the strategy of waiting until the last possible day to exercise an option, which maximizes expected value, will not maximize expected utility. The strategy which maximizes expected utility is obtained by a dynamic programming formulation of the decision problem. At each day (or decision stage), the option holder may choose to act (exercise) or wait until the next day. Working backwards from the last day, a series of critical prices are obtained, with the optimal strategy being as follows: act if the stock price on any day is greater than the critical price for that day; otherwise, wait. Using the concept of proportional risk aversion developed by Pratt, we will demonstrate that, under certain conditions, a utility function which exhibits increasing proportional risk aversion is sufficient to create a series of finite critical prices. Moreover, once an option is exercised, the option holder continually faces a tactical decision to hold the stock and wait for capital gains or sell and take profits as ordinary income, thereby avoiding further risk. This decision may also be optimized by a dynamic programming scheme similar to the approach used above.

Security markets in major industrial countries have frequently been referred to as close to perfect markets. Probably the highest quality market for a class of securities is the United States government bill market; however, it is also frequently inferred that the United States listed equity market is also a near perfect market. In a perfect market, no opportunities for profit based upon past price movements or any other past data should exist; stocks in a perfect market are always at their proper price except for purely random fluctuations.