References
- The paper will concentrate on developments over the last ten years. A decade is a short gestation period in the development of academic theories and concepts
- Price and value are not synonymous. The latter is usually of considerable concern to accountants and the former is primarily the concern of economists.
- I found the original exposition by Ross (1976) extremely complex and most daunting. A so called “simple approach” by Huberman (1982) was equally intimidating Even some of the explanations in recent texts (Copeland and Weston, 1983 and Weston and Copeland. 1986) are not easy to follow. In other texts (Brigham, 1985 and Van Horne, 1986) the discussions are oversimplified.
- This concept of a market portfolio comprising all risky assets in the economy (and not only marketable securities) has only recently appeared in the leading financial texts (Copeland and Weston, 1983; Weston and Copeland. 1986; Reilly, 1985), probably as a result of the comprehensive critique by Roll (1977), although the concept was first articulated by Mayers in 1976. The development of this all- embracing market portfolio concept will be the subject of a comment later It should be noted that Sharpe, (1970 19.) stated “The totality of decisions determining an individual’s future prospects is called a portfolio”. (My emphasis).
- The effect of such relaxations is discussed and presented by Reilly, (1985) and Francis, (1980). Interested readers are referred to these authors As Francis states: “However, the fact that the analysis is not exactly determinate under realistic assumptions does not mean that it has no value The analysis still rationalises much observed behaviour explains such hither to unexplained practices as diversification, and offers realistic suggestions about the directions that prices and returns should follow when they deviate significantly from equilibrium” (p 544).
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