There appears to be growing interest in the development and estimation of simultaneous equation models for finance. Simkowitz and Jones [11] stimulated much of this concern in their observations on the need for these structures. Moreover, Simkowitz's application to the modeling of security returns with Logue [12] provides some support for these suggestions. Recently Lloyd [6] has argued that there may be significant problems in using two-stage least squares (hereafter 2SLS) with such models as a result of the potential for contemporaneous correlation in the structural errors across equations. The purpose of this note is to question several of Lloyd's conclusions and to provide some evidence that his findings may not be representative for the broad array of simultaneous models applicable to financial problems.

A temporary trading suspension in a listed security represents a temporal discontinuity in a continuous auction market. Although the SEC occasionally suspends trading in specific securities, the NYSE itself administratively halts trading in individual NYSE issues. The latter occur quite frequently (almost three per day on average), and typically last about two hours. NYSE-initiated suspensions are the focus of the present paper.

What we say here will surely have little effect on curriculum evolvement since changes in subject, content, and emphasis follow on the heels of significant improvements in theory or dramatic changes in the institutional setting, rather than on teacher preferences.

The purpose of this paper is to describe a computerized classroom teaching tool for use in money and banking courses. A basic macroeconomic model and simulation program are introduced, along with classroom presentations and sample output. In addition, the technical details of the simulation, including operating costs, are explained.

Like any course, the basic money and financial institutions course, or money and banking as it is more frequently designated, takes on the unique coloration of the instructor. However, this course appears to be so affected more than most other finance and economics courses at this level. This occurs because, although it is a second course, it is still a very broad course in design, and more importantly, because it encompasses the three approaches to the teaching of economics and finance–description, theory, and policy. Different instructors emphasize different aspects, at times, to the almost total exclusion of one or both of the other two. But, judging from the financial failure of textbooks that have attempted to focus on just one of these aspects, say, financial institutions or monetary economics, it appears that most instructors prefer the broader and more diffuse coverage. And so do I.

To discuss what's right and wrong with the teaching of contemporary money-andbanking courses, we must first distinguish the various species of courses that fall under the M&B genus. In economics departments, the undergraduate M&B course is conceived prototypically in either of two ways: (1) as a basic macroeconomics course, including in principle (though often not in practice) an introductory swipe at international finance, or (2) as a policy course focusing on the art of central banking, including an obligatory introduction to opportunities for intervention in foreign-exchange markets. For convenience, let's call these alternative course conceptions (M&B)1 and (M&B)2, respectively. In business-school finance departments, M&B courses seek primarily to explain how contemporary financial markets and institutions work. These courses develop analytical descriptions of different types of financial transactions, instruments, transactors (with special emphasis on the roles played by intermediaries, dealers, and brokers), and contract terms (with special focus on implicit and explicit yields). Whereas MBA-level offerings are of negligible importance to the typical economics department, they represent a sizeable portion of the finance-department M&B market. Undergraduate M&B courses in finance departments–(M&B)3–differ from MBA-level ones–(M&B)–in assuming that students possess little background or interest in macroeconomic theory per se. (M&B)4 courses shape up as a linear combination of (M&B)3 and either or both (M&B)1 and (M&B)2.

Models of return generation for securities are potentially important for a number of reasons, including their possible utility in normative portfolio construction. Multi-index models of the process are frequently suggested as an alternative to the familiar single-index models, but, while the multi-index models are intuitively appealing, their empirical superiority remains largely undemonstrated. This paper examines the extent to which three multi-index models succeed in eliminating dependence in the return residuals for a portfolio of common stocks. The relevance of this research lies in the promise that, while obviously requiring additional inputs to determine the efficient set of portfolios, multi-index models may succeed in identifying a more accurate set of efficient portfolios.

Employing a stochastic scenario approach and the capital asset pricing model, this study examines the position of shareholders in a hypothetical (modal) savings and loan association (SLA) holding a variable-rate mortgage (VRM) portfolio relative to the position of shareholders in an association holding fixed-rate mortgage (FRM) instruments. Because of the impossibility of accurately forecasting interest rates far into the future, the scenario approach was utilized to compare the two mortgage forms under simulated rising, falling and zero trend interest rate environments over a 30-year amortization period. Each scenario was generated by randomly selecting values from a distribution of first differences extracted from historical values of the Federal Home Loan Bank Average Cost of Funds Index.

The performance of firms operating in highly concentrated industries continues to be of interest. Substantial empirical research has focused on shareholder benefits in the form of book equity returns. Research by Bain [1] and by Mann [6], as well as others, found that higher rates of return on equity capital are associated with greater market power (measured by industry concentration ratios and entry barriers).

Sharpe, Jensen and Treynor composite measures are generally employed to measure the performance of a portfolio (or mutual fund). Friend and Blume [FB] have regressed the composite performance measure of random portfolios on the systematic risk (and standard deviation) to show that there exists strong bias in these composite performance measures. Employing actual mutual fund data, Klemkosky claims to have shown that the bias associated with composite performance measures using the semi-standard deviation and mean absolute deviation as risk surrogates is much smaller than that of the Sharpe, Jensen, and Treynor composite measures. Miller and Scholes have pointed out that both the functional form and skewness effect can affect the risk-return relation in capital asset pricing. Lintner has argued that the variance-return instead of the standard deviation-return relation is linearly related. However, one has never formally tested whether the functional form employed in investigating the risk-return relation is independent of different statistical risk proxies used. Furthermore, the impact of the skewness effect on the ex-post risk-return trade-off test has not been carefully investigated.

The paper first presents evidence on common stock returns autocorrelation and on the deterioration of the market model R2 as the returns measurement period is shortened. The empirical analysis uses returns intervals, ranging from 1 to 20 days, spanning an identical 1000 day period for a random sample of 20 NYSE firms in the Standard and Poor's 500. It is then shown that the negative R2, differencing interval relationship can be explained by the joint occurrence of negative autocorrelation in market index returns.

Our paper reports on tests of the weak form of the efficient markets hypothesis applied to spot foreign exchange contracts for the Canadian dollar, Swiss franc, Dutch guilder, German mark, British pound, and Japanese yen, during the period March, 1973, to August, 1973. We conclude that the evidence favors the efficient market hypotheses, and find that the behavior of one-day rates of return on spot contracts resembles the behavior noted for other speculative prices.

Bond Risk Premia, or synonymously, yield spreads have been the subject of numerous theoretical and empirical studies. These studies always measured the difference yield spread (DYS hereafter), usually in terms of U. S. Treasury Bonds, as shown in equation (1).

Purpose. The purpose of this paper is to examine the rate-of-return characteristics and risk-return relationships of low-priced, highly speculative securities and to compare these with those of so-called higher-quality issues. The capital asset pricing model is used as a framework for conducting this analysis.