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The author provides a response to an earlier article in this journal that criticized his work in the field of finance. The author comments on Durand's focus on statistical reliability. The author takes issue with Durand's criticism of the value of call deferment, claiming that the statistical sampling error was small. The author acknowledges that the second section of the paper presented a model, which was clearly untested, and argues that Durand cannot visit the same expectations on that model, which lacked data for testing. The author proposes that perhaps Durand's time had been better spent proposing a better solution.

The article comments on the work of M. H. Miller and F. Modigliani, who created a controversy with their ideas on capital costs. While the author concedes that this research was "internally consistent" he also believes that it was linked with traditional theory and aims to show the similarities between this research and that done by A. Barges. A hypothetical is presented in which a merchant in the U.S. considers whether or not to export and import goods from China. The businessperson is aware of the variables involved and makes his final decision on whether or not he believes that the ship will return with its cargo and on expected returns. An additional factor is how the expected return would be affected if the businessperson borrowed the money for the venture.

The article studies the relationship between decreasing or constant returns and concavity. The author provides a counterexample to show that the two common assumptions believed to be sufficient to imply concavity of the production function are, in reality, not sufficient. The common assumptions on single product production functions are concavity along any ray through the origin and convexity of production sets. According to the author, if homotheticity is added to the assumptions, concavity is implied.

The accounting rate of return (ARR) has traditionally been used as a surrogate for the economic rate of return (IRR) in evaluating the effectiveness of managements' capital investment decisions. Over the years, some question has been raised as to the validity of using the ARR as an approximation of the IRR. Several papers have recently come to grips with this question with varying degrees of success. This paper is intended to expose the conceptual differences between these rates of return, with the goal of clearly pointing out just how useful the ARR can be to management. [ABSTRACT FROM AUTHOR]

The article presents information on investment criteria and the cost of capital. According to elementary economic theory, profit is maximized when marginal revenue equals marginal cost. By adapting this doctrine to the capital budgeting situation, we get the theory that a company's investment program should be expanded to the point where the return from the last dollar invested equals the cost of raising that dollar. This suggests that a rational decision to accept or reject a particular investment opportunity can be made consistently. Unless the rate of return exceeds the cost of raising funds in the capital market and offer should be rejected.

This paper investigates the properties of a market for risky assets on the basis of a simple model of general equilibrium of exchange, where individual investors seek to maximize preference functions over expected yield and variance of yield on their portfolios. A theory of market risk premiums is outlined, and it is shown that general equilibrium implies the existence of a so-called "market line," relating per dollar expected yield and standard deviation of yield. The concept of price of risk is discussed in terms of the slope of this line. [ABSTRACT FROM AUTHOR]

In a number of recent papers [11] [12],[2] it has been shown that, for the United States, the behavior of the term structure of interest rates can be explained remarkably well by combining the "Preferred Habitat" version of the Expectation Theory with a simple and readily tractable model of the formation of expectations, a model in which expected future rates are represented by a linear function of past rates.
The purpose of the present paper is to generalize that approach and to strengthen the evidence supporting it in two major directions.
First, we endeavor to broaden and refine the earlier analysis by making proper allowance for one additional factor, which is entirely consistent with the spirit of the model but was not duly taken into account, namely the effect of expectations of future changes in the price level. Evidence is provided that this additional factor is empirically important and that by allowing for it one can obtain a significant improvement in fit as well as a reduction in the serial correlation of the residual error. Some further improvement can also be achieved by introducing a variable intended to measure the effect of changes in the uncertainty about the future course of interest rates on the risk premium.
Our second goal is to provide independent evidence in support of both the expectation theory and of our model of expectation formation and of the determinants of the risk premium, by exploring the relation between our model and the "rational expectation hypothesis". To this end we first derive expressions for the "optimal" (in the least square sense) linear forecast of all future rates, conditional upon the past history of rates of interest and rates of inflation. We show that the relation between the long rate and the history of short rates and prices which is estimated in the process of fitting our term structure equation is broadly similar to the relation that would hold if, in fact, (1) the long rate were an average... [ABSTRACT FROM AUTHOR]

The article examines the profit performance effects of the separation of the ownership from control in large United States Industrial corporations. It is reported that between the years 1961 and 1969 there was a growing separation of ownership from control in large U.S. industrial corporations. The article explains that this separation affected three different aspects of the corporations' profit performance. These changes included the average rate of return on net worth, the variability of rates of return, and the response of rates of return to changes in corporate profits tax rates.

Presents abstracts of studies presented at a convention in Rome, Italy in September 1965. 'A Peak at the Trade-off Relationship Between Expected Return and Risk,' by Robert Summers; 'Dynamic Optimality Analysis and the Time-Elasticity of Demand Concept,' by John M. Scheidell; 'Invariance Axioms and Technological Change,' by Marcel K. Richter.