A Test of the Conditional CAPM with Simultaneous Estimation of the First and Second Conditional Moments

Recent studies of the conditional Capital Asset Pricing Model (CAPM) are extended by modeling the first and second conditional moments separately, but estimating them jointly, allowing the isolation of time-varying influences in the different moments. Results support evidence that both conditional moments and conditional risk parameters are time varying, and help shed light on previous rejections of the conditional CAPM. The GMM test of the over-identifying restrictions fails to reject the null that the CAPM holds through time when a non-linear specification is used, and only weakly rejects the null with a linear specification.     

FRA: Teaching Financial Accounting with a Goal-Based Scenario

This paper reports on the development of FRA (Financial Report Analyst), an intelligent, multimedia educational software system which is designed to teach financial statement analysis to business students and professional trainees. FRA is based on a new kind of teaching architecture called a goal-based scenario, a “learning by doing” environment in which the student acts in a realistic role and obtains helpful coaching while performing assigned tasks. In FRA, the student plays the role of a lending analyst at a bank who must make important commercial lending decisions. Usability tests of FRA have been conducted with students in the Kellogg Graduate School of Management at Northwestern University. The paper discusses: theoretical advantages of goal-based scenarios; the architecture of FRA; and ongoing and future research.     

Small CPA firm product differentiation in the small business market

This study investigates the product differentiation factors that major referees use in referring CPA's to small business. Two methodological approaches are developed. The first is a systematic method of cue determination. The second examines the convergence of different judgments to test the external validity of single-system lens model results. The results show that the referees most value good working relationships and technical competence.     

Returns to corporate diversification in the 1970s

This research analyzes the performance of large corporations during the business cycles of the 1970s. The analysis identifies the level of diversification preferred by a risk-averse investor at different stages of the business cycle. The data base is a group of 222 large industrial corporations for which the number of four-digit SIC production areas has been determined for each firm. The analytical method used is that of second-degree stochastic dominance, a method that is sensitive not only to mean differences in corporate performance but also to the skewness of profitability distributions. The findings indicate that risk-averters would prefer the ten-year performance of moderately diversified firms to the performance of firms with low levels of diversification. In addition, moderately diversified firms were preferred to highly diversified firms. Finally, the experience of the 1970s suggest that there are serious managerial diseconomies of diversification in recessions.     

ADAM SMITH: TWO LETTERS TO HENRY BEAUFOY, MP

This article prints two hitherto unknown letters by Adam Smith to Henry Beaufoy (1750-95), MP for Great Yarmouth, concerning legislation that beaufoy and William Pitt had promoted. In the first letter (14 November 1786) Smith comments on changes to existing customs and exicese regulations(26 Geo. III c.49 and c.59), and implicitly takes some credit for legislation concerning the hering fishery (25 Geo. III c.65, 26 Geo. III c.81, 27 Geo. III c.10). In the second letter (29 January 1787) Smith expresses considerable pessimism about the philanthropic proposals of the British Fisheries Society to build fishing villages in the Highlands and Islands of Scotland.     

Urban structure,gas prices,and the demand for transportation

This paper investigates how the characteristics of demand for space help determine the response of aggregate automobile mileage to increased gasoline prices. A typical monocentric model is considered in which household heads commute to work at the center of city. Precise results are derived under the assumption that all households have the same income and that transportation is a small item in the typical budget. Finally, a numerical projection is made based on estimates of the relevant parameters.