and dividends is consistent with the notion that sources and uses of funds
should rise and fall together, the relationship is weak for this sample.
- The results are in reasonable agreement with Ben-Zion (1984), who used ordi-
nary least squares analysis to investigate the relationship between research and
development and the firm’s market value for 157 firms during the 1969–1977
period. However, patents, stock betas, and lagged patents rarely influence the
stock price, counter to Ben-Zion’s results. The stock price maximization
framework for R&D analysis proposed in Guerard and Bean (1986) is not
found to be as significant as reported in the larger sample.
- Additional assumptions that were needed to estimate the model, such as depre-
ciation schedules, can be found in balance sheets and income statements in
Guerard and Bean (1987).
- We believe that a causal modeling technique (such as LISREL) should be em-
ployed to examine the linkages between public and private R&D expenditures
and the financial decisions that affect stock market prices.
CHAPTER 9 The Optimization of Efficient Portfolios
- The GlobeFlex Capital Management proprietary modeling and trading systems
have outperformed the respective benchmarks for small capitalization, small-
cap growth, and mid-cap portfolios during their real-time trading periods. The
past one-year and three-year returns, ended December 31, 2002, are:
Portfolio Portfolio Return Index Return Period
Small Capitalization –14.71 –20.48 One-Year
–7.58 –7.54 Three-Year
12.94 10.17 Inception
Small-Cap Growth –22.87 –30.26 One-Year
–13.98 –21.11 Three-Year
–9.09 –16.31 Inception
Mid-Cap –17.09 –16.18 One-Year
1.13 –5.04 Three-Year
14.67 10.79 Inception
The GlobeFlex portfolio index returns lead to higher Sharpe ratios, because
the GlobeFlex portfolios normally produce (significantly) smaller standard de-
viations than the index returns.
CHAPTER 10 The (Not So Special) Case
of Social Investing
- The initial academic study finding that 17 socially responsible mutual funds es-
tablished prior to 1985 outperformed—that is, underperformed less than—tra-
ditional mutual funds of similar risk for the 1986–1990 period was that of
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