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-- _- ? 

.- - - .-------- - __-_--_-- 

?

-

SiMON FRASER UNIVERSITY

747

?

.

?

MEMORANDUM

?

I

?

SENATE 

?

From

SENATE GRADUATE STUDIES COMMITTEE 

Subject

NEW COURSE PROPOSALS - ECON 815-5 

01 '7 C ?

Date MAY 15, 1974 

flYTh fl flfl*1 ? - -- -

MOTION: ? 

"That Senate approve, as set forth in S.74-76, 

the new graduate course proposals for 

ECON 815-5 - Portfolio Theory and 

ECON 817-5 - Theory of Capital Markets." 

is

SiMON FRASER UNIVERSITY

S-7474

. ?

MEMORANDUM

I

?

Senate 

?

From

Wheatley 

Dean of Graduate 

Si-udfc

Subject

Graduate Course Proposal - E 

?

Date ?

May 1, 1974 

and Commerce 

MOTION: "That the new courses, Econ 815-5 and 817-5, 

be approved by Senate." 

These courses were approved by the Executive Committee of the 

Senate Graduate Studies Committee, on April 29, 1974. 

Jon Wheatley 

Dean of Graduate St1dies 

mm!

attach. 

.

Dept. of Economic. 

?

\ _

COttr5(: :ti;ilr:__

Portfolio 

Theory 

Cicdi I lluis 

?

_Prc; u 

cCCi()

t(:

if ny:_j_5. 

- ?

NrO

?

!.1') SC .Ti1 C : 

EtitCd Enrol i.:nt :5- 

5

WhC

'

will the course first he offered:__9__   

_

how of tn 

?

the

COIJrSC

be of fercd: once _per year,subjecttominimum enrollment of five 

- 3usJ:lrT.CA1')ON: 

The course      

_to_de 

élo 

a_

rigoru _ 

frmrnrk_?r_

a&d

• •dfinancial resources involving outcomes tha!t cannot bQ 

redjgtPd wjtb nompI

te_

lnty

It has, when properly interpreted, broaderrelevance _toasset _preference_thegtb.nto the• 

REScflCES: 

lThi.ch Fvculty mtnber will normally teach the course: Cheng,_HerzQg 

?

_

p1te 

What are the budgetary

of mounting

i.i;plicationS

the course: Nil.

Are

there sufficient. Library resources (append details): ys,_exceptcomputer_

prngrni

security price tapes to be acquired 

tpp(:fldeth

Outline of the 

Course ? 

on the longru.n 

basis.. 

An indication of

the

co!çctcncc of

the Faculty member to give the course 

Library resources

Approved: D.irtntaJ. Graduate Stttdies Committee: _Date:_____

Faculty 

CrdtiiIe Studies Coinit

ic:

.-4----Date:_

Date: 

I)att' 

815-5 Portfolio Theory 

*General Description: 

A study of optimum portfolio selections and diversification of financial assets 

including cash vis-a-vis different classes of utility functions of final wealth. 

Also, an examination of the behavior of speculative prices and rates of return. 

Topical Matters and Readings: 

?

I. ? 

Utility Theory and Risk Aversion 

Luce, R. D., and Raiffa, H., Games and Decisions, John Wiley and Sons, New 

York, 1966, Chapter 2, 

pp.

12-38. 

Pratt, J., Risk Aversion in the Small and in the Large," Econometrica, Vol. 32, 

Jan. - April, 1964, pp. 122-136. 

Hadar, J., and Russell, W. R., "Rules for Ordering Uncertain Prospects," 

American Economic Review, Vol. LIX, No. 1, March 1969, 

pp.

25-34. 

Arrow, K. J., "Alternative Approaches to the Theory of Choice in Riskbearing 

Situations," Econometrica, October 1951, pp. 404-437. 

.

?

I.

?

The Markowitz One-Period Mean-Variance i4odel 

Markowitz. 11., "Portfolio Selection," Journal of Finance, March 1952, 

pp.

77-91. 

Sharpe, W. F., Portfolio Theory and Capital Markets, McGraw-Hill, New York, 

1970, 

pp.

1-73, 

pp.

223-256, 

pp.

257-273. 

Tobin, J., "Liquidity Preference As Behavior Towards Risk," Review of Economic 

Studies, Feb. 1958, 

pp.

65-86. 

Hakansson, N. H., "Mean-Variance Analysis of Average Compound Returns," 

Proceedings of the Conference on Capital Market Theory, unpublished manuscript. 

Tsiang, S. C., "The Rationale of the Mean-standard Deviation Analysis, Skewness 

Preference, and TheDetnd fOr Money," American Economic Review, Vol. 62, 3, 

pp.

354-371. 

?

III. 

?

The Markowitz Multi-Period Mean-Variance Model 

Mossin, J., "Optimal Multiperiod Portfolio Policies," Journal of Business, 

April 1968, 

pp.

215-229. 

Cheng, P. L., "Efficient Portfolio Selections Beyond the Markowitz Frontier," 

Journal of Financial and Quantitative Analysis, December 1971, 

pp.

1207-1234. 

2

?

.V. ? 

The Hakannsson-Latane Geometric Mean Model 

Latane, J., "Criteria for Choice Among Risky Ventures," Journal of Political 

Economy, April 1959, 

pp.

1440155. 

Hakansson, N. H., "Capital Growth and the Mean-Varianèe Approach to Portfolio 

Selection," Journal of Financial and Quantitative Analysis, Jan. 197, 

pp.

517-557. 

"Multi-period Mean-variance Analysis: Toward A General 

Theory of Portfolio Choice," Journal of Finance, Sept. 1971, 

pp.

857-884. 

?

V. ? 

Portfolio Model With Stable Paretlan Distribution 

Fama, E., "Portfolio Analysis In A Stable Paretian Model," Management Science, 

January 1965, 

pp.

404-419. 

Fama, E., and Roll, R., "Some Properties of Symmetric Stable Distributions," 

Journal of American Statistical Association, Sept. 1968, 

pp.

817-836. 

Samuelson, P. A., "Efficient Portfolio Selection for Pareto-Levy Investments," 

Journal of Financial and Quantitative Analysis, June 1967, 

pp.

107-122. 

?

81.

?

Security Rites of Return and Behavior of Speculative Prices 

Fisher, L. and Lone, J. H., "Rates of Return on Investment In Common Stocks," 

Journal of Business, January 1964, 

pp.

1-21. 

Fisher, L., "Outcomes for Random Investment in Common Stocks Listed On The New 

York Stock Exchange," Ibid., April 1965, 

pp.

149-161. 

Cheng, P. L., and Deets, K., "Statistical Biases and Security Rates of Return," 

Journal of Financial and Quantiative Analysis, June 1971, 

pp.

977-994. 

Fama, E., "The Behavior of Stock Market Prices," Journal of Business, 

January 1965, 

pp.

34-105. 

Mandlebrot, B., "Forecasts of Future Prices, Unbiased Markets, and 'Martingale' 

Models," Ibid., January 1966, 

pp.

242-255. 

Osborne, M. F. M., "Some Quantiative Tests for Stock Price Generating Models 

and Trading Folklore," Journal of American Statistical Association, June 1967, 

pp. 321-340 

Ying, Charles, "Stock Market Prices and Volume of 

Sales," 

Econometnica, 

January 1965, 

pp.

88-113. 

d1.

'I

Praetz, P. D., "The Distribution of Share Price Changes," Journal of Business, 

January 1972, 

PP.

49-55. 

Cheng, P. L., and Deets, K.,, "Portfolio Returns and The Random Walk Theory," 

Journal of Finance, March 1971, 

pp.

11-30. 

, "Portfolio Returns and The Random Walk Theory, Reply," Ibid., 

June 1973, pp. 742-45. 

West. R. and Tiniç S. M., "Portfolio Returns and The Random Walk Theory, 

Comment" Ibid., 

pp.

733-741. 

VIII. 

Portfolio Horizon Problems, Revisions and Transaction Costs 

Pogue, J., "An Extension of the Markowitz Portfolio Selection Model To 

Include Variable Transactions Costs, Short Sales, Leverage Policies, 

and Taxes," Journal of Finance, Dec. 1970, 

pp.

1005-1027. 

Cheng, P. L., "Portfolio Adjustment, Investment Horizon and Transaction Cost," 

unpublished manuscript. 

IX.

Lifetime Portfolio Selection Models 

• ? 

Samuelson, P. A., "Lifetime Portfolio Selection by Dynamic Stochastic Programming," 

Review of Economics and Statistics, August 1969, 

pp.

239-246. 

Merton, Robert, "Lifetime Portfolio Selection Under Uncertainty: The Continuous- 

Time Case," Ibid., 

pp.

247-257. 

Hakansson, N. H., "Optimal Investment and Consumption Strategies Under Risk For 

A Class of Utility Functions," Econometrlca, September 1970. 

"Optimal Investment and Consumption Strategies Under Risk, 

An Uncertain Lifetime, and Insurance," International Economic Review, October 1969. 

Choice of Text: 

While the major portion of the readings will be journal articles, the book by 

William Sharpe, Portfolio Theory and Capital Markets, McGraw-Hill, New York, 

1970, might well serve to begin the course. The capital market theory portion 

of the book wilibe excluded for class use, however. 

5.

., fi I I'

I ,' ? 

-0.

t:rn.sn t

Economics and Commerce 

Course 

1'tmiher :J 

Theory of Capital Markets 

mrk ? 

i1ihri ? 

thor i ? 

-isk 

p

ile atie.--.--•.—•----- 

_altiQn.JBQdeiS 

testing 

Cidii cu: 

?

5

?

'cc to:: ? 

5Q

?

prc; • 

equisite(Z) if ny:83O-5jS-5_ 

?

C1)U ? 

: *

Estiatc 

Enci) lnt : 

?

5-15   IThen 

will 

?

the course first be offered: 

?

1975-Ill 

How

Often 

will, ? 

the ? 

COUISC

bo

offered: 

Once per year 

(subject to mm. enrolment 

of 5). 

• JUSTIFTCAT)ON: 

- .

?

ThpurseLt1attemPt to itegrate financial and capital theory with 

macroeconomic 

s

and

monetary theory. Such an integ 

r

ation sjnot possible - 

without a solid grounding in financial theory and market institutions. 

- RESOURCES: 

IThich Faculty miither will normally teach the course: 

?

?

Chen ? 

egree-- 

is completed). 

That 

are

the budgetary' 

ipii.cations of mounting

the

course: Nil 

Me there 

sufficient

Library resources (append details): 

?

Yes

Appended: 

a) Outline

of the 

Course 

b)

An indiCaton of 

the

cocç)etCncc

of the Factilty rienber to give 

the

course 

c)

Library 

resources 

:.

**

Approved: Dei rttnta) Graduate Studies Ccmmittcc:A. 

?

nate:aL_ 

Faculty Criduitc Stud e 

Senntc (aduat 

?

Stt'die.s 

cwi

ttc'e:       

?

1)ate:

o_

. ?

- ......

817-5 Theory of Capital Markets 

General Description: 

A study of capital market equilibirum theories, risk allocation, valuation 

models under perfect and imperfect markets and their empirical testing. 

Topical Matters and Readings: 

I.

Capital Market and Valuation Models In Perfect Markets 

Arrow, K. 

3.,

"The Role of Securities in the Optimal Allocation of Riskbearing," 

Review of Economic Studies, April 1964, 

pp.

91-96. 

Sharpe, W. F., "Capital Assets Prices: A Theory of Market Equilibrium Under 

Conditions of Risk," Journal of Finance, Sept. 1964, 

pp.

425-442. 

Lintner, J., "Security Prices, Risk and Maximal Gains From Diversification," 

Journal of Finance, Dec. 1965, 

pp.

13-37. 

Fama,,E. "Risk. Return and Equilibrium: Some Clarifying Comments," 

• ? 

Journal o 

f

Finance, March 1968, 

pp.

29-40. 

Borch, Karl, "General Equilibrium in the Economics and Uncertainty," In 

Karl Borch and Jan Mossin (eds.) Risk and Uncertainty, St. Martin's Press, 

Inc., New York, 1968. 

Sharpe, W. F., Portfolio Theory and Capital Markets, McGraw-Hill, New York, 

1970, Chapter 10, State Preference Theory, 

pp.

202-220. 

Hirshielfer, J., "Investment Decision Under Uncertainty: Choice-Theoretic 

?

Approaches," Quarterly Journal of Economics, Nov. 1965, 

pp.

509-536. 

, "Investment Decision Under Uncertainty, Applications of the 

State-Preference Approach," Ibid., May 1966, 

pp.

252-277. 

Lintner, J., "The Market Price of Risk, Size of Market and Investor's 

Risk Aversion," Rev, of Econ. and Stat., Feb. 

'

1971, 

pp.

87-99. 

Diamond, P. A., "The Role of A Stock Market 

in

A General Equilibrium Model with 

Technological Uncertainty," American Economic Review, Sept. 1967, 

pp.

759-776. 

II.

Capital Market and Valuation Models In Imperfect Markets 

Brennan, M. 

3.,

"Capital Market Equilibrium with Divergent 

Borlowing 

and

Lending Rates," Journal of Financial and Quantitative Analysis, Dec. 1971, 

pp.

1197-1205. 

Black, F., "Capital Market Equilibrium with Restricted Borrowing," Journal 

of Business, July 1912, 

pp.

444.454. 

Mayers, D.. "Non-marketable Assets and Capital Market Equilibrium Under Uncertainty," 

In M. C. Jensen, ed., Studies in the Theory of Capital Markets, Praerger, New 

2

.. ? 

Empirical Tests 

of

Capital Asset Pricing Models 

Black, F., Jensen, M. C., and Scholes, N., "The Capital Asset Pricing Model: 

Some Empirical Tests," in M. Jensen, ed. Studies in the Theory of Capital 

Markets, op. cit. 

Miller, M., and Scholes, N., "Rates of Return in Relation to Risk: A Re- 

examination of Some Recent Findings," Ibid. 

Jensen, M., "Capital Markets: Theory and Evidence," The Bell Journal of 

Economics and Management Science, Autumn 1972, 

pp.

357-398. 

Friend, I., and Marshall, B., "Measurement of Portfolio Performance Under 

Uncertainty," American Economic Review, Sept. 1970, 

pp.

561-75. 

Roll, Richard, "Evidence on the 'Growth-Optimum' Model," Journal of Finance, 

June 1973. 

, "Bias in Fitting The Sharpe Model to Time Series Data," 

Journal of Financial and Quantitative Analysis, Sept. 1969, 

pp.

271-289. 

Fama, E., and MacBeth, J. D., "Risk, Return and Equilibiruni: Empirical Tests," 

Journal of Pol. Econ., May-June 1973, 

pp.

607-636. 

V. ? 

Capital Market Equilibrium, Cost of Capital and Corporate Investment Criteria 

Modigliani, F., and Miller, N., "The Cost of Capital, Corporation Finance, 

and the Theory of Investment," American Economic Review, June 1958, 

pp.

261-297. 

"Corporate Income Taxes and The Cost of Capital: A Correction," 

Ibid., June 1963. 

pp.

433-443. 

"Some Estimates of the Cost of Capital to the Electric Utility 

Industry, 1954-1957, Ibid., June 1966, 

pp.

333-391. 

Cheng, P. L., "Comment on 'Corporate Income Taxes and the Cost of Capital: 

?

A Correction'," Forthcoming, American Economic Review, September 1974. 

Mossin, J., "Security Pricing and Investment Criteria in Competitive Markets," 

American Economic Review, Dec. 1969, 

pp.

749-756. 

Kumar, P., "Security Pricing and Investment Criteria in Competitive Markets, A 

Comment," American Economic Review, March 1972, 

pp.

143-146. 

Mossin, J., "Reply," Ibid., 

pp.

147-149. 

Lintner, J., "The Valuation of Risk Assets and the Selection of Risky Investments 

in Stock Portfolios and Capital Budgets," Review of Economics and Statistics, 

Feb. 1965, 

pp.

13-37. 

is

?

Haley, C. W., "Comment" on above, Ibid., May 1969, 

pp.

220-221. 

Hamada, R. S., "Portfolio Analysis, Market Equilibrium and Corporation Finance," 

Journal of Finance, March 1969, 

pp.

13-31. 

Rubinstein, M. E., "A Mean-variance Synthesis of Corporate Financial Theory," 

Journal of Finance, March 1973, pp. 167-181. 

3

Kumar, P., "Market Equilibrium and Corporation Finance, Some Issues," 

Journal of Finance, forthcoming 

Lltzenberger, R. H., and Budd, A. P., "Corporate Investment Criteria and the 

Valuation of Risk Assets," Journal of Financial and Quantitative Analysis, 

Dec. 1970, 

pp.

395-419. 

Kumar, P., "Market Equilibrium and Investment Critierla, A Critique," manuscript. 

V. ? 

Capital Market Equilibrium With Default Risk on Bonds 

Stlglitz, J., "A Re-examination of the Modigliani-Miller Theorem," 

American Economic Review, Dec. 1969, 

pp.

784-793. 

_, "Some Aspects of the Pure Theory of Corporate Finance: Bankrupcies 

and Take-overs," Bell Journal of Economics and Management Science, Autumn 1972, 

pp.

458-482. 

Smith. V., "Default Risk, Scale and the Homemade Leverage Theorem," 

American Economic Review, March 1972, pp. 66-76. 

Cheng, P. L., "Comment: Default Risk, Scale and the Homemade Leverage Theorem," 

manuscript. 

Cheng, P. L., "Valuation of Corporate Bonds, Leverage, and Security Yields," 

manuscript. 

11. ? 

Capital Market Equilibrium and The Horizon Problem 

Jensen, M., "Risk, The Pricing of Capital Assets, and the Evaluation of 

Investment Portfolios," Journal of Business, April 1969, 

pp.

167-247. 

Cheng,P. L., and Deets, K., "Systematic Risk and The Horizon Problem 

Journal of Financial and Quantitative Analysis, March 1973, 

pp.

299-316. 

Choice of Text: 

Jensen, M., ed., Studies in the Theory of Capital Markets, Praeger Publishers, 

New York, 1972. 

a

Appendix: Library Resources 

Three data tapes that will be useful for empirical investigation when 

the development of the course reaches the stage of stimulating research by 

students for their Ph.D. dissertation: 

Standard and Poor's Monthly security prices frcn 

1

937 - 1972

Standard and Poor's Daily security prices from 

1965 -

1974

of

Standard and Poor's COMPUSTAT - a tape consisting/quarterly asset 

and financial positions of U.S. and Canadian 

firms 

There are several portfolio selection programs as computer softwares 

which can be acquired with little cost. 

I .

CURRICULUM VITAE 

. _

Name: John P. Herzog 

Birthplace and Date: Canton, Ohio, August 

28, 1931.

Marital Status: Married, 

children (1 at home) 

Education: 

Institutions 

?

Deg

ree

?

Period 

University of California, 

?

B.S. (Honors) 

?

1956-58

Berkeley 

University of California, 

?

Ph.D. ? 

1958-62

Berkeley 

Teaching Experience: 

Institutions 

?

Dates 

?

Rank 

Regular Appointments 

Simon Fraser University, 

?

1969-

Professor (Acting 

Burnaby, B. C. 

?

Chairman, DEC, 

1970-

•

?

August, 1971) 

Claremont Graduate School, 

?

1965-1969

Associate Professor 

Claremont, California 

.

?

(Chairman, Business 

Economics, 

1967-68)

University of Wisconsin, 

?

1961-1965

Assistant Professor 

Madison 

Jniversity of California 

?

1960-1961 ?

Instructor 

Extension, Berkeley 

Visiting Appointments 

University of California, 

?

Summer, 

1968 ?

Visiting Associate 

Los Angeles ? 

Professor 

Universit y 

of California, 

?

Winter, 

1968 ?

Visiting Associate 

Riverside ? 

Professor 

Courses Taught Elsewhere 

1.

Undergraduate: Corporation Finance, Financial Management, Investment 

Management, Securities Markets, Money and Capital Markets, Money and 

Banking, Financial Institutions, Urban Land Economics, Real Estate 

Finance, Real Estate Valuation. 

2.

Graduate: Managerial Finance, Financial. Analysis, Introduction to 

Moneyfi ows, Moneyf lows Analysts, Monetary Theory, Money and t:hc 

Financial System, Urban Land Economics, Real Estate AnaLysis. 

-2.- 

3. Tnterdisciplinary Courses Developed and Taught: Fusiness Forum, 

Genior Seminar in Business, Urban Dynamics (Graduate and Under- 

graduate). 

Courses Taught at S.F.U. 

1. Undergraduate: Commerce 313, Corporation Finance; Commerce 413, 

Financial Management; Commerce 493, Selected Topics in the Theory 

of Finance; Commerce 473, Administrative Policy. 

'. Graduate: NBA 691, Managerial Economics; MBA 605, Market Strat- 

egies; MBA 607, Administrative Policy. 

Business Experience: 

Northwestern Mutual Life ? 

Appraiser and ? 

1956-56 

Insurance Company and Monterey ? 

Mortgage Loan 

Savings and Loan Association, ? 

Negotiator 

Monterey, California 

Military Experience: 

U.S. Air Force Intelligence and Security Service;. 1950-54, Russian 

Translator/Interpreter; Honorable Discharge. 

. ?

Scholastic Honors: 

Phi Beta Kappa, Liberal Arts Honorary. 

Beta Gamma Sigma, Business Administration Honorary, 

(President, U.C. Berkeley Chapter, 1958-59). 

Glenn T. Whitman Foundation Scholarship, 1957. 

Real Estate Research Program Fellow, 1958-61. 

Professional Societies Memberships: 

\mnrican Economic Association 

A merican Finance Association 

American Real Fstate and Urban Economics kssociation 

Canadian Economics Association 

'inancial Management Association 

''estern Economics Association 

1estern Finance Association, Member, Executive Committee, 1972-74. 

Professional Activities: 

1.

Lecturer in School for Credit Union Personnel, sponsored jointly 

by University of Wisconsin and Credit Union National Association. 

2.

Lecturer in Family Finance Program, sponsored jointly by Univer- 

sity of Visconsin Schools of Commerce and Education. 

-3-

Lecturer in numerous University Extension and Management Tnsti- 

tute programs md to business, professional, and alumni organ- 

izations. Various topics in Economics, Finance, Urban Economics, 

and Business Management. 

A ?

Part-time consultant to several business, charitable, and not- 

for-profit organizations. Present or past Board member in 

most of these groups. 

5.

Participant in orshop in Finance (Invited) at Harvard Business 

School, Summer 1967. 74orkshop sponsored by Ford 

r

'oundation for 

25 Finance professors from across North America. 

6. Participant in seminar on Urban Land Economics: Barriers to 

Research (invited). Sponsored by Claremont Men's College and 

John C. Lincoln Institute, March 1970. 

7.

Participant in seminar on Econometric Method in Appraising 

(Invited) at Las Vegas, Nevada. Sponsored by International 

Association of Assessment Officers, October 1970. 

8.

Session Chairman and Discussant(at various times) on programs 

of the American Finance Association, American Real Estate and 

• ? 

Urban Economics Association, Midwest Economics Association, 

Western Economics Association, and Western Finance Association. 

9. Referee (at various times) for Journal of Finance, Journal of 

Financial and Ouantitative Analysis, Land Economics, Canadian 

Journal of Economics, and Western Economic Journal, as well as 

several book publishers. 

10. Invited Papers Presented before Professional Organizations: 

a. "The Role of Capital Formation in Urban America," to John 

C. Lincoln Institute and Henry George School, November 1970. 

h. "Portfolio Risk in Mortgage Insurance," to FULEB Housing 

Advisory Group, January 1971. 

c. "Default and Foreclosure Risks in Home Mortgages," (with 

J.S. Earley) to American Statistical Association, Applied 

Statistics Division, October 1966. 

11. Member of numerous committees (at various times) for American 

Real Estate and Urban Economics Association and Western Finance 

Association. Western Canada Regional Director for Omicron Delta 

Epsilon (conomics Honor Society). 

0 ?

/4

-4-

Publications: 

1. "Depreciation Allowances in a Rational Urban Strategy," with T.R. 

Smith, Land 

Economics

(forthcoming), (refereed). 

2.

"Natural Behavior Toward Risk and the Question of Value Determin- 

ation: Comment," Journal of Financial and Quantitative Analysis, 

March 1973. 

3. Home Mortga ? 

Delinquency and Foreclosure, with J.S. Earley (Herzog 

is senior author), Princeton University Press for the National 

Bureau of Economic Research, Inc.; Princeton, 1970 (extensive 

review process). 

4.

"Structural. Change in the 1-lousebuilding Industry," Chapter con- 

tributed to Urban Housing, W.L.C, Wheaton, et al, eds., Free 

Press; New York, 1966 (invited). 

. "Land Value Taxation, Western City, August 1966 (Invited). 

6.

"Postwar Residential Mortgage Quality," Annual Report, National 

Bureau of Economic Research, Inc., June 1964. 

7.

"Investor Experience in Corporate Securities," Journal of F5nance, 

is

?

19641964. Abstracted in Journal of Economic Abstracts, October 

1964 (both refereed). 

8.

"Structural Change in the Housebuilding Industry," Land Economics, 

May 1963 (refereed). 

9.

The Dynamics of Large-Scale Housebuilding, Real Estate Research 

Program, Institute of Business and Economic Research, University 

of California, Berkeley, 1963 (refereed). 

10.

"Big Builder - Today's Giant in the Housing Industry," California 

Builder, October 1962. 

11.

"The Large-Scale Housebuilder - Trouble 

Ahead?" Bay 

Area Real 

Estate Report, January 1961. 

12.

Trends and Factors Influencing Real Estate, Instructor's manual 

for use in University of California Real Estate Extension Course, 

1953 (refereed). 

13.

Book Reviews (all invoted): 

a. The Valuation of Real Estate, A.A. Ring, Journal of Finance, 

December 1963. 

is ? 

-5-

b.

Growth Yields on Common Stock, R.W. Soldovsky and J.T. Murphy, 

Journal of Finance, December 1964. 

c.

The Tenement Landlord, Goerge Sternlieb, Journal of Finance, 

December 1965. 

1 esearch in Progress: 

1.

Corporate Performance, Financial Management, and Yields on 

Common 

Stock. 

2.

Normative Rules for Capital Budgeting Under Risk. 

3.

Textbook in Financial Management. Manuscript approximately 

one-half complete. Contract signed with wadsworth Publishing. 

/

RESUME 

?

V.100.4 --

]flt

I. PAO LUN CHENG 

?

Born: May 29, 1922 

II. ACADEMIC DEGRESS: 

B.S., National Chiao-Tung University (China), 1944, Business Administration 

M.A., University of Missouri, 1949, Economics (Major: Economic Theory) 

Ph.D., University of Wisconsin, 1956, Economics (Major: Economic Theory) 

III. 

ACADEMIC POSITIONS: 

Instructor in Economics, University of Missouri, 1949-1951 

Instructor in Economics and Business, University of Maine, 1954-56 

Assistant Professor in Economics andBusiness, University of Maine, 1956-57 

Lecturer in Economics, Michigan State University, 1957-58 

Associate Professor of Finance, University of Massachusetts, 1958-62 

Professor of Finance, University of Massachusetts, 1962- 

IV.

ACADEMIC HONORS, FELLOWSHIPS, AWARDS, ETC.: 

"University Fellowship," 1951-52, University of Wisconsin 

"Doctoral Fellowship," 1953-54, American Institute For Economic Research 

Faculty Research Grant, 1958-59, University of Massachusetts 

Faculty Research Grant, 1959-60, University of Massachusetts 

Faculty Research Grant, 1960-61, University of Massachusetts 

• ? 

Ford 

Foundation Fellowship on "Computer Simulation and Management Games," 

Summer of 1961 (5 weeks), Carnegie Institute of Technolngy 

Ford Foundation Fellowship on "Intensive Application of Mathematics and 

Statistics in Business," Summer of 1962 (8 weeks), University of Michigan 

Ford Foundation Fellowship, Research Workshop in Marketing, Summer of 1963 

(6 weeks), University of California, Berkeley 

Ford Foundation Fellowship, Research Workshop in Organizational Behavior, 

Summer of 1964 (4 weeks), Carnegie Institute of Technology 

Grant ($3,400) from Labor Relations and Research Center, University of 

Massachusetts, 1964 

Grant ($500) from Carnegie Institute of Technology for research in 

Experimental Economics, 1964 

Ford Foundation Fellowship, Research Workshop in Management Science, 

Summer of 1965 (6 weeks), University of California, Berkeley 

Ford Fellow, Faculty Research in Business and Economics, 1964-65, full-time 

annual research award. 

V.

TEACHING INTERESTS: 

Undergraduate: Money and Banking, Financial Institutions, Corporation 

Finance and Investments 

Graduate: Financial Analysis, Multivariate Statistical Methods for Business 

and Economics, Banking Theory, Bargaining and Game Theory, and Operations 

Research 

?

-

PRO

LUN CHENG 

..'VI. 

Research Interests: 

SFinancial and portfolio theory; management science approach to decision- 

making; bargaining theory and experimental games; and macro-economic theory. 

VII. PUBLICATIONS: 

"A Note on the Progressive Consumption Tax," Journal of Finance, Vol. VII, 

No. 3, September 1953, 

pp.

333-342. 

"Counter-Cyclical Property Taxation," American Journal of Economics and 

Sociology, Vol. 14, No. 2, January 1955, pp. 171-184. 

"Durability of Consume Goods and Business Instability," Journal of Finance, 

Vol. XL, No. 4, December 1956, 

pp.

484-486. 

"Rates 

of Change and Cyclical Magnitudes," Proceedings of the American 

Statistical Association, Business and Economic Statistics, December 1958, 

pp. 142-149. (Co-author, L. Lempert) 

"Compensatory Property Taxation," National Tax Journal, Vol. XII, No. 31, 

September 1959, pp. 270-275. (Co-author, A. Edwards) 

"Facts About Agriculture in Counties of the Commonwealth of Massachusetts," 

A Series of 12 monographs under the direction of Dr. John Foster and 

published by the University of Massachusetts Extension Service, College 

of Agriculture. 

"Flow-of-Funds Accounts and National Income Accounts," or Chapter III of 

American Financial System: Institutions and Markets, by James B. Ludtke, 

Allyn and Bacon, 1961, pp. 40-67. (Co-author, James B. Ludtke) 

"Optimum Bond Portfolio Selections," Management Science, Vol. 8, No. 4, 

July 1962, 

pp.

490-499. 

Above is 

reprinted in Analytical Methods in Banking, edited by F. Hammers 

and K. Cohen, Homewood, Illinois, Irwin Company, 1966. 

"Short-Run Manipulative Aspects of Common Stock Warrants," Quarterly Review 

of Economics and Business, (University of Illinois) Vol. 3, No. 2, 

Summer 1963, pp. 102-107, (Co-author Donald Savage). 

"Consumption of Non-Durable Goods and Contractual Commitment of Income," 

Review of Economics and Statistics (Harvard University) Vol. XLV, No. 3, 

August 1963, 

pp.

254-264. 

"A Contribution to the Theory of Capital Budgeting," Journal of Finance, 

No., Vol. XVIII, December 1963. (Co-author Dr. John P. Shelton) 

Above is reprinted in Management Information A Quantitative Accent, 

edited by T. Williams and C. Griffin, Homewood, Illinois, 1967. 

PAO

LUN CHENG 

-3.

VII. PUBLICATIONS: 

(Continued) 

'Diagonal Model and Portfolio Selection for IBM-1620 (1oK) Computer As 

Group 

based 

Library, 

upon Professor 

(

CO-Programmer: 

William Sharpe's 

Mr. Hugn 

Diagonal 

Gardner), 

Model," 

February 

IBM-1620 

1964. 

User's 

"Toward a Theory of Competition by Promotion Among Financial Firms," 

New Research in Marketing, The Institute of Business and Economic 

Research, Univrsity 

of

alifornia, ierkeley, 1966, pp.17-27. 

"A

Shelton) 

Finance, 

C

ontribution 

Vol.

to

the

No.,

Theory 

December

of Capital 

19,

Eudetirip, 

pp.

671-72. 

Reply," 

(CO-author: 

Journal 

J.

of

P.

"Bargaining 

Review, Vol. 

Power 

21,

and

No.

Wage 

2, January 

N

e g

otiation,. 

1968, 

"Industrial and Labor Relations 

"Comment, 

Relations 

Bargaining 

Review, Vol. 

Power 

22,

and

No.

Wa

g

1,

e

N

October 

egotiation," 

1968,

Industrial 

pp.

95iö].7

and

Labor 

"Counting 

A.

Methodology 

Hyp

Wayne 

ergeometrjc 

Partitions 

Corcorazi., 

of

and

O

p

erations 

1ultino::ija1 

and

11aLional 

Evaluating 

Research, 

ssociProbabilities*" 

Pro

a

t

An

T

babilities 

ni

ACCountin 

of A 

c

Selected 

of

iitts, 

Events 

'

mp

ai2jtor 

1968. 

Readinc's 

Related 

for

to

.

"The Common Level of Assesstnent in Property Taxation," National Tax 

Journal, Vol. XXIII, No. 1, 

M a

r

ch1970, 

pp.50-65.

"Statistical 

Vol. 16, No. 

Control 

10, June 

of Assessment 

1970, B-638 

U

niformity," 

-

B-655.

Management Science, 

"Comment, 

Relations 

Bargaining 

Review, Vol. 

Power 

23and 

2

No,

Wage 

3

?

1

April 1970, pp. 421-9. 

and Labor 

"Portfolio Returns and the Random Walk Theory," Journal of Finance 

Vol. XXVI, No. 1, March 1971, pp.11-30, (Co-author: M. Ong Ds.) 

Above 

General 

is re- 

o

rinted 

Learning 

in Readings 

Pri72T 

in

M

anat7ement, Morristown, New Jersey: 

"Statitjcal Biases and Security Rates of Return," Journal of Financial 

Ta-author: 

and Quantitative 

N.Klng 

Analfleets.) 

ysis, 

Vol. 

VT, No, 

June 

"Efficient Portfolio Selections Beyond the Markowitz Frontier," Journal 

PP-

of Financial 

o7-I14:

and

Quantitative 

Analysis, Vol. VI, No. 

December 1971, 

•

?

?

"Comment, 

XXVI, No, 

Tests 

I,

of

September 

Portfolio 

1971, 

Building 

pp . 

6

Rules," 

5-972, (Co-autJJournal 

j

o

of

j

N.

Finance, 

-

King Deets,)Vol. 

?

PAO LUN CHENG 

?

-4-

VII. 

PUBLICATIONS: (continued) 

"Book Review: Bargaining, Monopoly Power versus Union Power by George 

de Menu (The M.I.T. Press, 1971)," Industrial and Labor Relations 

Review, January 1973, pp. 884-6. 

"Portfolio Returns and the Random Walk Theory, Reply," Journal of 

Finance, June 1973, 

pp.

742-45 (Co-author: M.King Deets.) 

"Systematic Risk and the Horizon Problem," Journal of Financial and 

Quantitative Analysis, March 1973, pp. 299-316, (Co-author: N. King 

Deets.) 

"Corporate Income Taxes and the Cost of Capital, A correction, Comment," 

forthcoming, American Economic Review, September 1974. 

"A Reference Model of Assessment Performance," forthcoming, Proceedin 

gs

of International Association of Assessing Officers, 1973. 

VIII. 

PAPERS DELIVERED IN PROFESSIONAL SOCIETIES: 

"Statistical Indicators and Cyclical Amplitudes," Proceedings, Mid-west 

Economic Association Conference, April 1958. 

"Rates of Change and Cyclical Magnitudes," Proceedings of the American 

Statistical Association, Business and Economic Statistics, December 

1958, 

pp.

142-149, (Co-author: L. Lempert.) 

"Optimum Capital Budgeting and Optimum Hurdle Rate," Institute of 

?

Management Science, Mohawk Chapter Conference, April 1964. 

"Business Cycles and Economic Growth," New England Conference of the 

Deans of Schools of Business Administration, November 1960. 

"Discussion: Patterns of Corporate Financial Behavior, by Donald Farrar, 

R. Glauber and J.R. Meyer," Econometric Society and American Finance 

Association Joint Conference, December 1965. 

"Systematic Risk and the Horizon Problem," Conference of the Western 

?

Finance Association, August 1972, (Co-author: M. King Deets.) 

"Valuation, Leverage and Equilibrium Yields of Risky Securities," 

Conference of the Western Finance Association, June 1974. 

"Probability of Statistical Concepts in the Model of Assessment Uniformity," 

Miami Conference of the International Association of Assessing Officers, 

November 1973. 

lie, 

?

?

[Note: All co-authors listed in articles and papers in Sections VII and VIII are 

?

junior authors.] 

is

PAO LUN CHENG ? 

-5-

IX.

SERVICES AND COUSULTING: 

Referee for American Economic Review 

Journal of Finance 

Management Science 

Journal of Financial and Quantitative Analysis 

Industrial and Labor Relations Review 

Tax Consultant, Holyoke Water Power Company, Mass., 1968-1970. 

Finance Consultant to Massachusetts Review, 1962-63. 

X.

MEMBERSHIP IN PROFESSIONAL SOCIETIES: 

American Economic Association 

American Statistical Association 

American Finance Association 

The Institute of Management Science 

Econometric Society 

XI.

REFERENCES: 

Professor Martin Bronfenbrenner, Department of Economics, Duke University. 

Professor Anthony Y.C. Koo, Department of Economics, Michigan State 

University, East Lansing, Michigan. 

Professor John P. Shelton, Graduate School of Business Administration, 

University of California, Los Angeles, California. 

Professor Edwin Young, Chanceller, University of Wisconsin, Madison, 

Wisconsin. 

Professor Oswald Tippo, University of Massachusetts, Amherst, Massachusetts, 

(Chanceller of the University, 1965-1971). 

Professor H. B. Kirshen, School of Business Administration, University of 

Santa Clara, California, (Dean of the School of Business Administration, 

University of Massachusetts, 1957-67.) 

Professor Frank C. Jen, Chairman, Department of Operations Analysis, 

School of Management, State University of New York at Buffalo, Buffalo, 

New York. 

Professor Robert P. Shay, Graduate School of Business Administration, 

Columbia University, New York, New York. 

Curri-culun, Vitae 

1. Name: 

?

Lr11u3t

N. Scott 

2.

Departmn 

?

Economics and Commerce 

3.

Cureiit Rank: 

?

Instructor 

4. E 

ffectjv dates- 

-

ap7)ointment 

appointment 

to current 

at S.F.U.: 

rank:Septci 

September 

i

ber 1, 

1,

1972

3972

5. EducjonaiB.,ckoufld 

Name of institution 

?

DreeCoilfcrrcd 

?

Year

ree

(onferred 

UUniversity 

niversity 

of

of

Nashingtot-t 

Manitoba 

??

NBA

BScl';E 

??

1946

1969

6.

.

7.

loynnit 

Record 

Name of Orgaaization 

Rank/Title 

ianitoba 

Manitoba 

Manitoba 

tianitoha 

Unjversjt 

Simon 

S:iiion 

Fra.ec 

i'rar 

?

?

llydro 

Hydro 

?

lydro 

lydro 

of

iJnivcrsity 

UniversityBritish 

Columbia 

Chief, 

Division 

?

Ass

T.A. 

TInstructor 

.A.

Elec 

't.Di.rector 

Director 

.

Sect. 

Ninnipc,' iLcctric Co. 

Engineer 

Engineer 

Canadian General Electric 

Test Engineer 

._iocl 

of l 

ii,Lo 

y jii t 

Sept. 

1

/72 to

date 

FaLl ? 

mc;1:er, 1971 

Spring, 1971 

1962-M7 

i.958-Ly62 

1956-i 

958

954-.L9s6 

1947--i95L 

1946-] 947 

S.

Comm. 31:1-3, 

Comm. 

436-5, 

NiJ

?

607-5, 

N'3A ? 

621-55 

(

'enPraLt(e Servj(p 

Business l:uIance 

Quantitative 

Methods

in

Bjp55

0rganit:i on Policy 

Inf011 

"ation and Control Systems (T .A.) 

9.

MBL\ Steerjn Coiiunitp 

IlUflOur, Awards and Grants 

Doctoral Fellowship 

Doctoral Fellowship 

Doctoral 

Centennial 

Fellowship

Sept. 1972 to date. 

The

Canada 

Council 

?

1972

The Canada Council. 

?

1971

The Canada Council 

?

1970

Xerox of Canada Ltd. 

?

1969

/2

*

?

2/.

10. Publications 

.ieucnal_Articles: 

ubijshcd articles (up to 1967) were all 

IlL

the area of electric 

utility engineering. 

ii. Research in Progress 

Ph.D. Dissertation: Dividend Announcements and EfficienL Markets. 

12.

Other 

Relevant Information 

Coquitlam Chamber of Commerce: 1)Lcparaion of an application for a 

overnnent of Canada LIP grant  

support an economi and 

-

social. 

study re: the feasibility of amalgamation of loco-1unzen ,Port Moody, 

Port Coquitlain and Coquitiam. 

.