VARIABLE TRANSACTIONS COSTS, THE CAPITAL ASSET PRICING MODEL AND THE CORPORATE DIVIDEND DECISION: A COMMENT

This comment addresses some econometric issues raised by Theobald's model of capital market equilibrium in the presence of variable transactions costs. Theil's results on specification error analysis in the absence of relevant explanatory variables are invoked. It is shown that for Theobald's model to be consistent with the empirical findings of Black, Jensen, and Scholes, more stringent requirements must be satisfied.