A comment on the empirical distribution of squared unexpected returns

Article Abstract:

Lobo and Mahmoud's (1989) study on the distribution of the normal theory test statistic obtained from two-day squared standardized unexpected returns is replicated with regard to firm size. Their conclusion that the test statistic distribution means are lower than normal theory suggests is not borne out, nor is their finding that large values for such statistics may result from smaller firms conclusively supported. The results suggest that controlling for firm size is essential in using squared returns in comparative studies, and that theoretically-derived means are inappropriate in such examinations. Lobo and Mahmoud's findings may have resulted from two errors in the programs used in their study which may have caused a FORTRAN-compiler-specific error.

Statistics, Statistics (Data)

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Noncontrollable costs and optimal performance measurement

Article Abstract:

It is suggested that non-controllable cost allocation in a sequential department setting could be explained by intermediate division heads' private data or by a 'noisy' quality-generating process. A proposition is presented to demonstrate that under a linear technology in combination with a bivariate standard normal distribution, it is optimal for companies to allocate non-controllable intermediate expenses so that the compensation of each final product division manager depends on that division's revenue.

Sequential analysis, Cost (Economics), Costs (Economics)

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