on the exclusion of assets from tests of the mean variance efficiency of the market portfolio this paper presents an analysis of the testability of the mean variance efficiency of a market index when the returns on some components of the index itself are not perfectly observable the results are basically not supportive of the notion that mean variance efficiency is testable on a subset of the assets bounding the market share of the missing asset and its expected return is not sufficient to produce a valid test when the variance of the missing asset is bounded and the amount of wealth that might be missing is small it is possible in principle to reject correctly the mean variance efficiency of a market index in his famous critique of the asset pricing theory tests roll 7 concludes that the only testable hypothesis associated with the generalized two parameter asset pricing model of black 1 is that the market portfolio is mean variance efficient it has been emphasized by ross 10 and roll 7 that the mean variance efficiency of the market portfolio is mathematically equivalent to a positive linear relation between expected returns and the betas calculated against such a portfolio roll 7 deduces that the theory capm is not testable unless the exact composition of the market portfolio is known and used in the tests this implies that the theory is not testable unless all individual assets are included in the sample errors of type one or two might occur when a market proxy is used instead of the true market portfolio even if the ex ante true expected returns and the covariance variance matrix of the returns on all the assets are used these errors are the result of the choice of the portfolio and as roll puts it even a small misspecification of the proxy s composition can lead to the wrong conclusion the market proxy might be mean variance efficient while the true market portfolio is not and vice versa in principle however there are cases in which the above two conditions are not both necessary to reject the theory one such exception presented by roll 7 is the case in which no totally positive portfolio is efficient if any totally positive market proxy is used a large sample would reject the null hypothesis unambiguously while the market portfolio identification problem constitutes a severe limitation to the testability of the theory the question of the mean variance efficiency of a particular market index with respect to a subset of assets is a typical problem of statistical inference the mean variance efficiency can be tested directly or by

optimal dynamic marketing mix policies for frequently purchased products and services versus consumer durable goods a generalized analytic approach abstract this paper deals with the qualitative characterization of optimal pricing and advertising policies together with the optimal ratio of the advertising elasticity of demand to its price elasticity over time the problem is studied for frequently purchased products and services fps as well as consumer durable goods cdg in both monopolistic and duopolistic markets demand dynamics cost learning and discounting of future profits are taken into consideration in addition both the open loop and feedback methodologies are pursued to characterize and compare the derived optimal policies the paper uses an analytical approach to characterize the optimal dynamic policies in a general setting as is mathematically tractable followed by the analysis of more specific models to gain additional managerial insights while maintaining a certain degree of generality optimal fps marketing mix policies are shown to be different from their cdg counterparts for both monopolistic and duopolistic markets while the ratio of advertising elasticity to price elasticity appears to have been governed by similar set of rules for fps and cdg the direction of change of such ratio over time looks different from each other managerial implications and directions for future research are also discussed

a differential games solution to a model of competition between a thief and the police this paper contains an extension of an optimal control model considered by sethi sethi s p 1979 optimal pilfenng policies for dynamic continuous thieves management sci 25 6 june 535 542 to a differential game situation it is assumed that sethi s concave thief i e a risk averter plays against the police whose objective function incorporates convex costs of law enforcement a one shot utility at the time of arrest and a continuous utility or cost rate after the thief is arrested the probability that the thief is caught by time t is influenced not only by the pilfering rate as is the case in sethi s model but also by the instrumental variable of the police namely its rate of law enforcement our aim is to analyze noncooperative nash solutions of the differential game sketched above due to the special structure of the hamiltonians a system of two nonlinear differential equations for the control variables of both players can be derived the system is solved explicitly under special assumptions it is shown that the optimal rate of law enforcement of police increases monotonically whereas for the nash optimal pilfering rate three cases may be characterized in which increase decrease or constancy occur thus the nash optimal solutions show in each case monotonic behavior i e changes in trend never occur moreover the dependency of the terminal values of control can be described finally an interpretation of the model as market entrance game is sketched

dynamic game results of the acquisition of new technology open and closed loop nash strategies are derived and analyzed for a differential game in which two competing firms choose prices and productive capacity where new technology reduces a firm s unit operating cost using an open loop strategy a firm makes an irreversible commitment to a future course of action for example a contract with a labor union may force a firm to commit to maintaining its entire workforce regardless of its competitor s future realized behavior in contrast using a closed loop strategy a firm s decisions evolve over time continuously responding to the competitor s behavior the dynamic nash strategies obtained for the closed loop model exhibit a more restricted acquisition of new technology and a greater reduction of existing capacity relative to the open loop solutions in addition the dynamic nash price to be charged for output is higher in the closed as opposed to open loop competitive environment numerical solutions are presented to demonstrate that if both firms apply the closed loop approach each will earn higher profits than if one or both firms choose an open loop strategy

the determinants of occupational success in britain this paper is concerned with measuring the true impact of certain human capital variables on an individual s occupational position the particular variables which are analysed are training qualifications and spells of sickness and unemployment the longitudinal nature of the data enables us to control for all relevant individual attributes which remain fixed over the period of the sample this is vitally important because these attributes are strongly correlated with the variables of interest and would seriously corrupt estimates derived from a single cross section a method of generating consistent estimates as n oo t fixed for a dynamic model with fixed effects is also illustrated

the nash solution of a maintenance production differential game abstract a simple two person nonzero sum differential game between the maintenance crew of a firm and the production department of the same firm is considered it is assumed that preventive maintenance decelerates the decrease in quality of a machine whereas the production activities set by the firm reduces the quality of the machine due to the special structure of the game a system of two differential equations for the non cooperative nash solution trajectories can be derived this provides a possibility to obtain qualitative insights into the structure of the solution paths by phase diagram methods without solving the necessary optimality conditions explicitly for small salvage values of the machine it is shown that the optimal maintenance expenditures decrease over time whereas the optimal production rate increases monotonically moreover another interpretation of the differential game analyzed is given as a conflict situation between a firm polluting the environment by producing an output and a governmental agency cleaning up the pollution

treasury bill factors and common stock returns capital asset pricing theory gives a linear ex ante relationship between a security s return and one special portfolio return the return on all assets this linear equation is called the capital asset pricing model capital asset pricing theory alone provides no empirical hypotheses because it is derived and defined wholly with expectations tests of empirical hypotheses with historical data require an additional proposition that relates ex ante and ex post returns a model for this second proposition is called a return generating equation arbitrage pricing theory gives a more compact method for deriving a linear ex ante security return model in the arbitrage theory developed by ross 6 the return generating equation is the basis for the ex ante return relationship briefly an approximate linear expected return equation is derived directly from the return generating equation so two separate models are not required in addition the ex ante return equation is defined in terms of an arbitrary number of special factor portfolio returns rather than a single market portfolio return in this sense arbitrage pricing theory has richer implications and a simpler structure than capital asset pricing arbitrage pricing theory starts with a linear return generating equation for each security

some results in the theory of arbitrage pricing this paper derives a stronger version of huberman s recent preference free pricing theorem this pricing result relates the expected return on an asset to its factor responses and the covariance structure of the residuals from a linear factor model it must characterize any infinite asset economy in which no arbitrage opportunities are present whether or not the factor model has uncorrelated residuals this result provides the intuition for the role of residual risk in the pricing model and eliminates some classes of arbitrage opportunities still present under huberman s bound some applications to empirical tests and performance measurement are also discussed the arbitrage pricing theory is one of several financial pricing models which attempts to explain the cross sectional variation in expected returns on assets in certain respects it is similar to the capital asset pricing model but there are both substantive and subtle differences one of the key advantages of the apt is that it derives a simple linear pricing relation approximating that in the capm without some of the latter s objectionable assumptions perhaps the key disadvantage of the apt is that it provides no clues as to what might be important factors nor as to how to interpret the factor premiums which appear in the pricing equation this paper serves several purposes after reviewing the linear factor model formulation in section i it derives in section ii a stronger version of huberman s 9 recent preference free pricing theorem this pricing result relates the expected return on an asset to its factor responses and the covariance structure of the residuals this relation must characterize any infinite asset economy in which no arbitrage opportunities are present whether or not a linear factor model with uncorrelated residuals is the appropriate returns generating mechanism section iii specializes this result by eliminating the effects of residual covariances and compares the results here to those of previous apt models when applied to the standard linear factor model with uncorrelated residuals this new pricing bound eliminates arbitrage opportunities which remain under huberman s bound this result also provides for the first time the intuition for the role of residual risk in the approximate pricing relation section v provides an interpretation of the factor premiums and gives a valid asset pricing model interpretation to the apt which is consistent with merton s

an international arbitrage pricing model with ppp deviations an internation al arbitrage pricing model with ppp deviations i introduction there is a growing literature examining the implications of purchasing power parity ppp deviations in international asset pricing models this literature typically assumes that residents of a country deflate nominal returns by their national price index in order to determine real returns in this setting stochastic ppp deviations imply that the real return on an asset differs internationally this international difference in real returns has forced authors to make important simplifying assumptions in order to derive international asset pricing models solnik 1974 develops an international capital asset pricing model icapm assuming no inflation and no correlation between ppp deviations and local real returns his model is extended by sercu 1980 to permit correlation between exchange rates and local real returns and by kouri and de macedo 1978 to allow for nonstochastic inflation this paper abandons the icapm approach in order to price assets in a setting of stochastic inflation rates stochastic ppp deviations and correlation between ppp deviations and real asset returns without imposing concomitant restrictions on agents utility functions 1 the paper extends ross s 1976 arbitrage pricing theory to an international environment with ppp deviations it improves upon solnik s 1983 and ross and walsh s 1983 international arbitrage pricing models iapm by i allowing both stochastic inflation and stochastic ppp deviations ii demonstrating how returns may be translated into any nominal or real numeraire and iii emphasizing the dynamic nature of international asset pricing in addition the model specifies risk the price of risk and the translation of these variables between all nominal and real numeraires as functions of the model s fundamental state variables this yields testable restrictions not found in domestic arbitrage pricing models apm 2 after deriving an iapm with ppp deviations this paper uses the model to examine the forward exchange market s riks premium the model s state variables determine the stochastic structure of ppp deviations and national price levels which in turn define the dynamics of risk and the price of risk the analysis demonstrates the potentially central role of ppp deviations in determining the evolution of forward exchange risk premia since the source of the bias between forward and future spot exchange rates has not bee convincingly identified and since ppp deviations have not been highlighted in studies of this bias future empirical investigations concerning the systematic discrepancies between forward and future spot exchange rates should incorporate ppp deviations 3 the model s equations are discussed in section ii section iii derives an intertemporal iapm with ppp deviations demonstrates how to translate risk and the price of risk into any nominal or real numeraire using the model s state variables and identifies testable restrictions not found in the domestic apm section iv derives and examines the forward exchange market s risk premium and section v presents a brief summary ii the model the world economy consists of n 1 countries each with its own currency currency 0 is arbitrarily chosen as the nominal numeraire every investor is able to issue and purchase assets in any country through freely floating international exchange markets it is assumed that country i has n sub i assets and the total number of assets mathematical expression omitted is much larger than the number of countries n 1 for convenience the first n 1 assets are nominally riskless in local currency terms so that asset o is country o s nominally riskless asset although all goods are available in each country residents of country i can consume only goods purchased in country i

exact arbitrage pricing and the minimum variance frontier the author examines the relationship between the arbitrage pricing theory of ross and mean variance analysis in particular conditions are derived on the vector of the factor risk premia that are equivalent to the existence of a strictly positively weighted portfolio on the minimum variance frontier also a sufficient condition is given under which the existence of a positive minimum variance portfolio of all the assets in the economy will imply the existence of a positive minimum variance portfolio on a subset this means that rejection of the hypothesis of the existence of a positive minimum variance portfolio on a subset satisfying this condition implies rejection for the whole set a growing body of literature explores the relationship between the arbitrage pricing theory apt of ross 13 14 and the mean variance model among the early work in this direction were the papers of chamberlain and rothschild 2 and chamberlain 1 these papers examine a sequence of economies and characterize the relationship in the limit between the mean and portfolio cost functionals and the minimum variance frontier chamberlain 1 also gives a condition under which exact arbitrage pricing will hold dybvig 4 and grinblatt and titman 7 examine equilibrium models in an apt context for a finite economy they derive sharp bounds on the deviation from exact arbitrage pricing recent papers by huberman kandel and stambaugh 9 and grinblatt and titman 8 explore the relationship between the apt and the mean variance model by studying portfolios that can be used as proxies for the factors and examining the relationship these portfolios bear to the minimum variance frontier these two papers also deal with equilibrium models in spite of the number and variety of equilibrium apt models the question of the pricing of factor risk in equilibrium remains largely unexplored this paper makes some progress in addressing that issue by looking at a given equilibrium restriction and studying the constraints it imposes on the vector of factor premia itself the most familiar equilibrium restriction we might study is the central implication of the capital asset pricing model capm that the market portfolio is efficient in particular no portfolio with the same expected return as the market portfolio has a smaller variance the restriction we actually study is weaker than

union rivalry and economic growth a differential game approach two decades ago sen 1961 1967 demonstrated how private saving versus consumption decisions are fundamentally different from collective decisions and how individual decisions may result in an insufficient amount of investments for the future his analyses were essentially applications of the prisoner s dilemma assuming that given the decisions of others each individual would be better off by not saving an additional unit whereas all would be better off by saving collectively it follows that no one will save although everyone would have preferred one more unit of saving by each individual because of the external effects between individuals decisions and the lack of influence on others actions nobody wants to invest himself although each individual would like to see others invest i e all try to shift the burden of saving onto others a very similar result was obtained a decade ago by lancaster 1973 in a fully dynamic context by applying nonzero sum differential game theory to the modelling of growth and distribution in a two class economy he demonstrated that the separation of saving and investment decisions leads to a pareto inferior outcome in a model where workers can control their share of consumption in total output but have no influence on the investment decision which is in the hands of capitalists and where both classes devise their strategies so as to maximize their own consumption over a fixed horizon the fundamental fact here is that workers and capitalists have to act under a dynamic externality one group s decision to save or invest for the future is affected by the fact that the accumulated amount may be consumed by the other group this paper was written to illustrate how dynamic inefficiency may also result from the feature of present day societies whereby the working class is not a single decision making unit but has organized itself in a number of trade unions which have to operate under the above mentioned dynamic externality it is shown that the welfare loss which results from the isolation

a multivariate linear regression test for the arbitrage pricing theory a test for the arbitrage pricing theory which employs a multivariate linear regression model is developed given a sample of return premiums for a set of n assets which includes a subset of k linearly independent portfolios the k factor apt hypothesis is accepted if the intercept term is zero in the multivariate regression of the n k returns on the k portfolios the test may be carried out simply by using univariate multiple regression software the relation of this test to the concept of performance potential and sharpe s measure of performance is also discussed if the performance potential of the k portfolios is not significantly less than the performance potential of the complete set of n assets then the k factor apt hypothesis is accepted in roll and ross rr 10 an empirical investigation of the ross 11 arbitrage theory of pricing apt was carried out the central core of the apt as outlined in rr is that the return generating process for a population of n assets is a linear function of only a few say k k n systematic factors or components and as a consequence many portfolios are close substitutes the central conclusion of the apt is that the mean premium return vector lies in a k dimensional subspace spanned by the factor loadings the purpose of the empirical investigation as claimed by rr was to investigate the existence of the factors and their association with the risk premia as stressed by rr their methodology does not determine k but is designed to test the hypothesis that there exist several factors whose factor loadings together explain a significant portion of the variation in the mean premium returns the empirical results in rr however indicate the presence of three to four priced factors the first empirical test outlined by rr involves two steps using time series data the mean return premium vector is estimated and a factor analysis procedure is used to estimate the k factors and their loadings a complex weighted least squares procedure is then used to estimate the linear model relating the mean return premium vector to the factor loadings the weighted least squares procedure requires estimation of the matrix of weights and is carried out for t 1 2 t cross sections in this paper the central conclusion of the apt is shown to be equivalent to a statement about the intercept term in the multivariate regression function of a

differential game models in management science abstract this paper reviews a number of differential games applications to management science and operations research problems published with a few exceptions during the last decade the purpose of the article is to provide the reader with an up to date account of the state of the art within this field after having stated in an introduction the general differential games framework as well as some conceptual problems we proceed to review the models which have been divided into the following functional areas investment consumption and employment production inventories and maintenance marketing advertising pricing and rd bargaining natural resources and pollution the survey concludes with some remarks on applicability solvability and directions for future research

an intertemporal general equilibrium model of asset prices this paper develops a continuous time general equilibrium model of a simple but complete economy and uses it to examine the behavior of asset prices in this model asset prices and their stochastic properties are determined endogenously one principal result is a partial differential equation which asset prices must satisfy the solution of this equation gives the equilibrium price of any asset in terms of the underlying real variables in the economy in this paper we develop a general equilibrium asset pricing model for use in applied research an important feature of the model is its integration of real and financial markets among other things the model endogenously determines the stochastic process followed by the equilibrium price of any financial asset and shows how this process depends on the underlying real variables the model is fully consistent with rational expectations and maximizing behavior on the part of all agents our framework is general enough to include many of the fundamental forces affecting asset markets yet it is tractable enough to be specialized easily to produce specific testable results furthermore the model can be extended in a number of straightforward ways consequently it is well suited to a wide variety of applications for example in a companion paper cox ingersoll and ross 7 we use the model to develop a theory of the term structure of interest rates many studies have been concerned with various aspects of asset pricing under uncertainty the most relevant to our work are the important papers on intertemporal asset pricing by merton 19 and lucas 16 working in a continuous time framework merton derives a relationship among the equilibrium expected rates of return on assets he shows that when investment opportunities are changing randomly over time this relationship will include effects which have no analogue in a static one period model lucas considers an economy with homogeneous individuals and a single consumption good which is produced by a number of processes the random output of these processes is exogenously determined and perishable assets are defined as claims to all or a part of the output of a process and the equilibrium determines the asset prices our theory draws on some elements of both of these papers like merton we formulate our model in continuous time and make full use of the analytical tractability that this affords the economic structure of our model is somewhat similar to that of lucas however we include both endogenous production and

transformed securities and alternative factor structures grinblatt and titman 1985 reformulate a result of chamberlain and rothschild 1983 to show that the approximate factor structure of chamberlain and rothschild is asymptotically equivalent to the strict factor structure of ross 1976 as long as investors can always repackage securities into an equal number of arbitrary portfolios this paper uses a procrustes rotation methodology that is compatible with the repackaging interpretation of grinblatt and titman to show that the empirical structure of stock prices is consistent with the convergency hypothesis

a new approach to testing asset pricing models the bilinear paradigm we propose a new approach to estimating and testing asset pricing models in the context of a bilinear paradigm introduced by kruskal 18 this approach is both simple and at the same time quite general as an illustration we apply it to the special case of the arbitrage pricing model where the number of factors is pre specified the data appear to be generally in conflict with a five or seven factor representation of the model used by roll and ross 30 when we consider the number of replications of our test and the large number of observations on which it is performed the frequency with which we reject the three factor apm does not lead us to conclude that this model is unrepresentative of security returns further the rejection of the five and seven factor versions is to be expected if the three factor version is correct the paradigm gives insight into the appropriate specification of the model and suggests that there may be a small number of economy wide factors that affect security returns tests of asset pricing models on the basis of observed stock market data have represented a staple of the financial economics literature of the past twenty years the early work is reviewed in the famous paper by jensen 12 and papers by fama and macbeth 6 rosenberg and marathe 31 and roll and ross 30 there has been a great deal of confusion regarding what testable propositions are implied by these models see discussion in roll 29 in this paper we show that at a minimum all asset pricing models yet proposed imply a simple easily testable hypothesis which we refer to as the bilinear hypothesis while specific models may imply further testable propositions if the bilinear hypothesis is rejected the model is inconsistent with the data and should be rejected our test exploits the fact that the economic content of any equilibrium asset pricing model can be expressed in the form of a potentially refutable constraint on the set of parameters of the process generating security returns this constraint specifies that given a set of security specific characteristics there exists a linear relationship common across securities relating expected returns to these

a critical reexamination of the empirical evidence on the arbitrage pricing theory this paper demonstrates that the roll and ross rr and other previously published tests of the apt are subject to several basic limitations there is a general nonequivalence of factor analyzing small groups of securities and factor analyzing a group of securities sufficiently large for the apt model to hold it is found that as one increases the number of securities the number of factors determined increases this increase in the number of factors with larger groups of securities cannot readily be explained by a distinction between priced and nonpriced risk factors as it is impermissible to carry out tests on whether a given risk factor is priced using factor analytic procedures the apt model as exposited by ross 17 18 and extended by huberman 9 has provided the basis of an extensive literature as for example brown and weinstein 1 chen 3 hughes 10 ingersoll 11 jobson 12 reinganum 15 roll and ross rr 16 and shanken 17 to mention but a few it has also been treated in a more general context by chamberlain and rothschild 2 our purpose here is not to comment on this collection of papers many of which are unpublished but to reexamine the evidence presented by rr and point out major pitfalls involved in the empirical methodology employed by them and others who have followed their lead rr claim that on theoretical and more importantly on empirical grounds arbitrage pricing theory apt is an attractive alternative to the capital asset pricing model capm the apt it is argued requires less stringent and presumably more plausible assumptions is more readily testable since it does not require the measurement of the market portfolio and may be better able to explain the anomalies found in the application of the capm to asset returns the acceptability of the apt like that of the capm or any other theory ultimately depends on its ability to explain the relevant empirical evidence our subsequent discussion will show that many of the prqblems associated with the capm are also present in the apt context and that its ability to explain the relevant empirical evidence is not markedly superior moreover it raises questions not only about the rr and related empirical investigations of the apt but also about the testability of that theory in the present state of the art a major part of the problem results from the necessity to break down the universe being analyzed through the apt model this is forced upon the investigator by the fact

a theory of career mobility this paper analyzes theoretically and empirically the role and significance of occupational mobility in the labor market focusing on individuals careers it provides additional dimensions to the analysis of investment in human capital wage differences across individuals and the relationships among promotions quits and interfirm occupational mobility it is shown that part of the returns to education is in the form of higher probabilities of occupational upgrading within or across firms given an origin occupation schooling increases the likelihood of occupational upgrading furthermore workers who are not promoted despite a high probability of promotion are more likely to quit

on the robustness of the roll and ross arbitrage pricing theory roll and ross 6 have written what has quickly become the classic article on testing the arbitrage pricing theory apt originally proposed by ross 8 they presented methods both for estimating the return generating process and for testing whether particular elements factors in the return generating process were priced in equilibrium they found that more factors are priced than one would expect to be priced if the capital asset pricing model capm were held

factor pricing in a finite economy abstract prior theoretical derivations of the arbitrage pricing theory apt bound an aggregate measure of the deviation of mean asset returns from that predicted by a linear pricing equation it is conceivable given this bound that some assets might be badly mispriced by the model in this paper a more intuitive derivation of the factor pricing equation is presented which describes the deviation on an asset by asset basis the deviation is shown to be small for assets in a realistic finite economy and is arbitrarily close to zero for those assets with arbitrarily small size relative to aggregate wealth it follows that the linear pricing equation provides a good approximation for the mean returns of all traded assets

bank failures as poisson variates abstract the elasticity of bank failures with respect to a set of explanatory variables is estimated using a maximum likelihood poisson estimator the resulting estimates are compared with their ols counterparts

multivariate proxies and asset pricing relations abstract a framework is developed in which inferences can be made about the validity of an equilibrium asset pricing relation even though the central aggregate in this relation is unobservable a multivariate proxy for the true market portfolio consisting of an equal weighted stock index and a long term government bond index is employed in an investigation of the sharpe lintner capm the empirical evidence suggests that we can reject the joint hypothesis that a capm is valid and b multiple correlation between the true market portfolio and proxy assets exceeds 0 7 connections to the equilibrium factor pricing literature are also explored

determination of optimal penalties for antitrust violations in a dynamic setting we analyze a differential game describing the interactions between a firm that might be violating competition law and the antitrust authority the objective of the authority is to minimize social costs loss in consumer surplus induced by an increase in prices above marginal costs it turns out that the penalty schemes which are used now in eu and us legislation appear not to be as efficient as desired from the point of view of minimization of consumer loss from price fixing activities of the firm in particular we prove that full compliance behavior is not sustainable as a nash equilibrium in markovian strategies over the whole planning period and moreover that it will never arise as the long run steady state equilibrium of the model we also investigate the question which penalty system enables us to completely deter cartel formation in a dynamic setting we found that this socially desirable outcome can be achieved in case the penalty is an increasing function of the degree of offence and is negatively related to the probability of law enforcement

occupational mobility in england this paper examines evidence on occupational movement in england using data from the new earnings panel dataset although most occupations are characterized by a high degree of immobility there is some evidence of an increase in occupational mobility between 1990 and 1994 using a compound poisson modelling approach for count data combined with a gravity model the paper investigates the incentives and constraints upon aggregate movement between occupations over two time periods 1985 90 and 1990 94 results suggest that the responsiveness of movement into a wide range of occupations as a result of a rise in wages is relatively elastic for males and relatively inelastic for females the paper also demonstrates that significant barriers to movement exist which either prevent a response to market signals or inhibit the extent of that response

local authority fiscal stance and the pattern of residential migration in the north west of england the degree of fiscal mobility present in household migration flows between local authority areas in northwestern england is assessed following an introduction the paper is divided into three sections the first reviews the methodologies of previous attempts to assess the extent of fiscally induced migration noting the dominance of american studies and outlines a choice theoretic structure within which it is possible to model human migration patterns section iii considers the problems inherent in modelling migration flows and section iv presents results for a compound poisson analysis of migration between local authority areas within the four counties of the north west region of england as well as an assessment of the prevalence of fiscal mobility excerpt

research expenditures and the discovery of new drugs this paper examines technical change in the ethical pharmaceutical industry a poisson specification is used to estimate a productivity relationship between research expenditures and drug discoveries thus taking into account the integer nature of the data the result s of estimations using panel data indicate that there is a positive c orrelation between a firm s research and development intensity and it s probability of discovering a new drug firm size however does not significantly affect the marginal productivity of research expenditu res finally the estimates show that an increase in regulatory strin gency decreases the expected number of new drug discoveries copyright 1987 by blackwell publishing ltd

some empirical tests of the theory of arbitrage pricing we estimate the parameters of ross s arbitrage pricing theory apt using daily return data during the 1963 78 period we compare the evidence on the apt and the capital asset pricing model capm as implemented by market indices and find that the apt performs well the theory is further supported in that estimated expected returns depend on estimated factor loadings and variables such as own variance and firm size do not contribute additional explanatory power to that of the factor loadings

dynamic optimal pricing and possibly advertising in the face of various kinds of potential entrants abstract several nonlinear stochastic models are developed for a dynamic profit maximizing firm with respect to its price and possibly advertising decisions under threat of entry the optimal price advertising policies for these models are characterized by the use of the maximum principle while the optimal policy will depend on the assumed functional forms it is shown that under certain plausible assumptions the optimal policy is to increase profit by charging a higher price and decrease the resulting threat of entry by a higher level of advertising

risk and return on long lived tangible assets abstract assuming rational expectations a specialization of ross arbitrage pricing theory is used to obtain a simple securities market valuation formula when dividends follow linear stochastic processes the implications of this model for the use of accounting data to measure risk and for capital budgeting are explored a new measure of riskiness based on accounting data is derived and the use of risk adjusted discount rates is evaluated

a simple approach to arbitrage pricing theory the following sections are included introductionarbitrage pricingdiscussionreferencesdiscussion notes on the arbitrage pricing theorypure arbitrage pricing theoryapproximate arbitrage and the aptapproximate factor modelsthe competitive equilibrium version of the aptconclusionnotereferences this abstract was borrowed from another version of this item

the current state of the arbitrage pricing theory this paper provides a simple proof of a recent theorem presented by reisman 1992 concerning the use of proxies for the factors in the return generating process of the arbitrage pricing theory apt in the single factor case the theorem asserts that any variable correlated with the factor can serve as the benchmark in an approximate apt expected return relation the significance of this result is considered and a new direction for empirical work on arbitrage pricing is outlined given a factor model for an infinite sequence of asset returns ross 1976 showed that the absence of arbitrage implies an approximate linear relation between expected returns and the factor betas ross assumed that returns conform to a strict factor structure i e a factor model with uncorrelated disturbances but noted that this condition could be weakened in deriving the arbitrage pricing theory apt nonetheless statistical methods based on the strict factor model assumption dominated the early empirical work on the apt at first glance the requirement of a strict factor structure appeared to impose a strong restriction on the sets of factors that could be used as a benchmark for measuring systematic risk shanken 1982 demonstrated though that virtually any variables could serve as the factors in a welldefined strict factor model one need only repackage an initial finite set of assets into an equivalent set of portfolios in order to fundamentally alter the associated factor space 2 thus the statistical assumptions underlying the apt cannot by themselves characterize the economically relevant components of returns chamberlain and rothschild 1983 shifted attention away from strict factor structures by proving that the apt holds more generally if returns conform to an approximate factor model 3 in this case the disturbances need

an explicit bound on individual assets deviations from apt pricing in a finite economy abstract ross s arbitrage pricing theory apt is a tractible and reasonable alternative to the mean variance model nonetheless understanding of the theory has been obscured by the complexity of the sequence economy models used for motivation by contrast we give a simple and direct derivation of the apt in a finite economy using an explicit bound on the deviations from apt prices across assets a coarse calculation shows that theoretical deviations from apt pricing are negligible in our economy

yes the apt is testable the arbitrage pricing theory apt has been proposed as an alternative to the meanvariance capital asset pricing model capm this paper considers the testability of the apt and points out the irrelevance for testing of the approximation error we refute shanken s objections including his assertion that roll s critique of the capm is applicable to the apt we also explain the testability of the apt on subsets and we explore the relationship between the apt and the capm the arbitrage pricing theory apt has been the subject of extensive research efforts since it was introduced by ross 36 37 the research has included theoretical papers and a growing empirical literature 2 nonetheless there seems to be some confusion in the literature about the relation between the theoretical underpinnings of the apt and its empirical tests this paper is an attempt to alleviate the confusion to illustrate the issues and to provide a focus section i of this paper is devoted to examining and refuting some points raised in shanken 40 which considers the testability of the apt the underlying premise of the apt is that asset returns ri are generated by a factor model of the form

opportunity preference and constraint an approach to the analysis of metropolitan migration the paper aims to consider how the fragmentation in the literature on migration may be overcome and to develop an integrated model of migration which can be applied to all types of population flow in the london metropolitan region the need for such an approach follows from the complexity of flows observed at the 112 zone level of disaggregation as well as the unresolved problems of the literature despite this catholicity of aim the theoretical basis of the model is essentially economic drawing on aspects of human capital and search and spatial choice theories with an emphasis on the interaction between three concepts opportunities preference and constraints in determining observed levels of migration