This study examines the historic security market performance of REIT shares during the six-year period 1968–1973. Performance measures suggested by Sharpe, Treynor, and Jensen were calculated for a sample of 30 larger and older REITs on both a pre- and post-tax basis. Principal conclusions are: 1) The average mortgage trust sampled had “outperformed” the S&P 500 while equity and hybrid trusts have fared poorer than the S&P 500. 2) The differences in performance levels are due principally to return levels and not risk differentials. 3) A substantial portion of the risk inherent in an REIT is diversifiable risk. This together with other evidence suggests that most REITs have not diversified risk exposure to the extent they indicated they would and were able to. 4) Performance rankings using before- and after-tax returns were identical, suggesting that certain espoused tax advantages unique to REITs have been virtually meaningless on a practical level.

Professors Heathcotte and Apilado investigate a mechanical stock market trading rule which attempts to exploit the implications for market short-run price action contained in the leading indicators of business cycles found on the NBER 1966 Short List. The authors note that, in approaching peaks of business cycles, turns in all of the other leading indicators on the List except corporate profits occur before turns in the Standard and Poor's 500 Common Stock Index. Virtually the opposite is true relative to cyclical troughs, i.e., they nearly all lag the Index. The authors generalize, therefore, that turns in composite or diffusion indices constructed of the leading indicators might provide profitable signals to take appropriate positions (long or short) in the Standard and Poor's 500 stocks.

Several titles reflecting different approaches to our subject matter were considered for the paper. An historical but somewhat pedantic approach to the teaching of investments might have been titled “Pedagogical Developments in Investments: Past, Present, and Future.” Another possibility was “Sex and the Single Investor,” a title which probably would have attracted a larger audience. “Beat the Dealer Versus Beat the Market” might well have been an appropriate title in view of our presence here in Las Vegas and also because of recent experience in the securities markets. We finally decided on simply “A Portfolio Analysis of the Teaching of Investments,” because this seems to better capture the essence of our viewpoint.

This study is concerned with the multiple-factor model of security returns, with its implications for a single-factor, market-index model applied to the same securities, and with statistical methods of estimating the parameters of a multiple-factor model and thereby operationalizing it. This part of the paper sets out the approach. The sequel will present the empirical results. The results show that there are highly significant extra-market components of covariance among security returns; moreover, these risk components are such that the loadings of individual security returns on the factors are determined by observable characteristics of the firm: income statement and balance sheet data, industry membership, and historical behavior of returns on the security. The results also show that the conventional security beta is a function of these same characteristics.

Consumer credit is an extremely significant factor in the economic expansion of the United States. Its annual compound rate of growth over the postwar period, averaging more than 15 percent, has considerably exceeded that of virtually all other economic indicators, and this expansion rate shows no sign of lessening. The importance of consumer credit is further emphasized by the fact that it accounts for nearly one-third the total liabilities of the household sector [11, p. 142]. And from the stand-point of financial institutions, consumer loans are vital because they are characteristically the most profitable investments in lenders' asset portfolios.

The problem of what to teach in investments courses can hardly have any one answerbecause teachers, students, levels, and purposes are too diverse. Even subject matter is debatable these days when one must make up his mind whether gold and antiques should be covered along with stocks and bonds, bills, and deposits. Thus what I offer here is one man's viewpoint, what seems most plausible to me out of 20 years' experience in brokerage and teaching: an opinion–no more, no less.

Among the topics that have been subjected to intensive research by businessschool scholars over the past two decades, few have received more attention than those which collectively comprise the field of investments. What is more important, even fewer have witnessed the plethora of important research findings that has been forthcoming in the investments field. Indeed, it seems reasonable to argue that in recent years no other business field's research accomplishments have been either as impressive or as generally reinforcing.

The Apilado, Warner, Dauten paper is notable in several respects. The problem of credit worthiness in consumer credit is certainly critical in our credit-oriented society. The research design is innovative and shows considerable thought. The paper's conclusions are modest, yet they do represent some progress in attempting to quantify the consumer credit-granting activities of financial institutions. This review of the paper will concentrate on two areas—research design and a broad discussion of the paper's practical applicability.

There have been many efforts in recent years to explain differences in the performance of commercial banks. Interest has centered on the extent to which changes in a selected group of indices of bank performance are related to the structure of banking markets and selected other factors thought to influence bank behavior. While various techniques have been used, the most common has been multiple linear regression. The measures of performance entered into the regression equations have included the price and quantity of bank services and bank profitability, while the explanatory variables have included, to name only a few, the one-, two-, or three-bank concentration ratio, the number of banks in the market, the existence of competition from nonbank financial institutions, bank costs, bank size, and proxies for the demand for banking services. Generalizations then have been made about the impact of market structure and other variables on bank performance, generalizations based upon the regression coefficients of the explanatory variables. The consensus appears to be that the demand for banking services and bank costs are significant determinants of the performance of individual commercial banks; market structure appears to be much less important. However, the conclusions are by no means unanimous.

Regulatory reform relating to commercial banks and other deposit financial institutions has been frequently observed to be “crisis-bred.” The National Banking Act, along with fundamental but complementary legislation of 1863 and 1864, was in large measure stimulated by problems of the Civil War. The Federal Reserve Act was an outgrowth of the Panic of 1907 which vividly demonstrated the need for a central bank. The McFadden Act of 1927, the Glass-Steagall Act of 1932, the Reconstruction Finance Act of 1932, the Federal Home Loan Bank Act of 1932, the Home Owners' Loan Act of 1933, the Emergency Banking Act and the Banking Act of 1933, the Securities Exchange Act of 1934 and the Banking Act of 1935 all reflected reactions to crises of various dimensions.

Recently, there has been no shortage of proposals for reforming the U.S. financial system. Proposals have been offered by the Hunt Commission, the Administration, and several other groups. All these proposals contain many common elements, attesting to the difficulty of obtaining comprehensive financial reform. The analysis here focuses primarily upon the Administration's 1973 recommendations.

Professors Fraser, Phillips, and Rose's paper on canonical analysis of bank performances is another welcome addition to the growing body of literature in the area of measurement of bank performances. Since the purpose of the paper is to report the results of the application of canonical correlations in measuring the performance of commercial banks in Texas (a unit banking state), my observations are restricted to the statistical aspects of the paper.

Structural reforms of a fundamental nature now under way in Wall Street have been proclaimed so often of late as to become commonplace. The fact that many of these changes are not welcomed by established and influential persons who make their living in or around Wall Street is not news. What may be news, however, is that neither of these facts is particularly new.