WORKING PAPER ABSTRACTS - 1974 Listed below are the abstracts for all of the working papers for this year. To see a list of paper titles (with links to available PDF files) click here. 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 01-74 The Demand for Risky Assets Irwin Friend and Marshall E. Blume [abstract] 02-74 Some New Bond Indexes John S. Bildersee [abstract] 03-74 Options and Efficiency Stephen A. Ross [abstract] 04-74 On Corporate Debt Maturity Strategies James A. Morris [abstract] 05-74 The Behavior of Risk and Return: An Econometric Study Marshall E. Blume [abstract] 06-74 Short-Run Asset Effects on Household Saying and Consumption Irwin Friend and Charles Lieberman [abstract] 07-74 The Monetary Sector in an Open Economy: An Empirical Analysis for Canada and Germany Richard J. Herring [abstract] 08-74 Working Capital, Risk, Growth and Diversification John S. Bildersee In some areas of finance there are many popular, sometimes conflicting and controversial theories. However, there are relatively few theories of working capital and its effects on the firm. Moreover, most of these theories do not consider the interactions between working capital, short term assets and the rest of the firm. Instead, studies in the working capital area are often programming models or case studies which, while informative, may be primarily problem oriented. Alternatively, some analyses apply inventory theory, but consider sectors of the firm rather than the entire firm. In this paper, a theory is developed depicting working capital as a liquid buffer stock protecting the permanent, risky activities of the firm and absorbing the fluctuations of the firm associated with deviations of returns from expectations. As an integral part of the theory a firm’s working capital position is related to the firm’s long term asset position and to the risk-return relationship that the firm has accepted. In addition, it will be shown that the model of working capital developed here is consistent with some of the more popular theories of dividend policy and the use of leverage. Finally, the implications of growth and diversification due to investments on the margin are examined with respect to working capital policies. 09-74 no abstract 10-74 no abstract 11-74 no abstract 12-74 no abstract 13-74 no abstract 14-74 A large number of articles in the popular financial press have highlighted the substantial differences in the returns from equal-weighted and value-weighted indexes over the last several years. Thus, an equal-weighted Value Line Composite Index declined 64.8 percent from March 11, 1968, to September 30, 1974, while the value-weighted New York Stock Exchange (NYSE) Composite Index declined only 33.2 percent over this same period. In trying to explain these differences, many observers have postulated the existence of the two, or even more, tiers in the market place. According to these observers, different types of stockholders confine their investments to specific tiers. The argument goes on that in recent years institutions have been channeling their huge amounts of new funds into a limited number of so-called favored stocks and thereby supporting their prices. Since these stocks, which constitute the upper tier, are generally stocks with larger market values, the recent differences in returns between equal-weighted indexes are said to be explained. An alternative explanation, but not the only alternative, is that equal-weighted indexes are inherently more risky than value-weighted indexes and that the observed differences in returns on these two kinds of indexes in recent years are consistent with their differences in risk. The purpose of this paper is to analyze the risk and return characteristics of indexes of NYSE stocks under various weighting schemes starting in 1928. Following this analysis is a discussion of the implications for portfolio management. 15-74 Important elements in almost every financial market are the dealers who stand ready to trade for their own accounts and thereby provide to the public the convenience of being able to trade immediately. Today the structure of securities markets is in the process of major change; and as part of this restructuring, a major issue is the way in which dealer services ought to be provided and what the appropriate balance between regulation and competition ought to be. In this paper the quality of dealer services in the over-the-counter (OTC) market as reflected in the nature and degree of dealer inventory changes is examined using NASDAQ (National Association of Securities Dealers Automated Quotation) system data on closing prices and dealer purchases and sales for each stock for each of six trading days between July 9, 1973 (Monday) and July 16, 1973. Appendix I contains a detailed discussion of the data.
Rodney L. White Center for Financial Research Telephone: (215) 898-7616 Facsimile: (215) 573-8084 Email: rlwctr@finance.wharton.upenn.edu Copyright ©1998 The Wharton School of the University of Pennsylvania. All rights reserved. Site designed by Singularity Design.