MODELLING HABIT PERSISTENCE*

The purpose of this paper is to derive the demand functions corresponding to an intertemporal linear expenditure system in which goods are durable, and in which there are penalty costs for changes in planned stocks. Taste changes over time can be interpreted as changes in the technology converting goods into characteristics.     

INFLATION,SECURITY VALUES,AND RISK PREMIA

The impact of stochastic inflation on the cross-sectional structure of nominal securities yields is examined. The analysis indicates that equilibrium required returns on debt and equity securities are affected differently by inflation and that the “Fisher Effect” is more likely to hold for equity returns than for debt yields. Implications for empirical investigations of portfolio performance and the real interest rate are explored.     

Discipline by objectives

Modern discipline is not punishment, but a shaper of behavior; it requires rules to be reviewed periodically against objectives to see if they are still productive in changing conditions and it allows the exceptional performer who is achieving exceptional results to be treated with far greater tolerance when it comes to violations.     

The care and feeding of MBA's

Hiring MBA's represents an investment at a significant risk level, and data on the firm's historical experience with MBA investments should be maintained and evaluated. The characteristics of the MBA which count toward performance should be discovered. The authors suggest several: maturity measures, quantitative orientation, educational specialty, attitude toward work.