Business Finance 921:
Empirical Research in Finance: A Syllabus

Winter 1995, Department of Finance, Ohio State University
G. Andrew Karolyi, 332 Hagerty Hall, (614) 292-1875
  1. Course Description
  2. Class Meetings and Format
  3. Course Resources and Requirements
  4. Grades
  5. Background References
  6. Course Outline
  7. Reading List and References

1. Course Description

This course represents an advanced study of empirical research methods in financial economics (formerly, it was entitled "Specifying and Testing Econometric Models of Asset Pricing"). We focus on the empirical techniques used most often in the analysis of financial markets and how they are applied to actual market data. The tentative list of topics includes: The relative emphasis that each topic receives within the last category will depend on the interests of the students.

2. Class Meetings and Format

We will meet each Monday and Wednesday, 9:30am-11:20am. Each week, I will assign relevant readings. These readings will consist of statistical background readings at times and specific papers in empirical financial economics. You are expected to read much of the material before the class. The class will not follow a lecture format; rather, I will act as the discussion leader and background resource, especially as it comes to techniques or methodology. I will attempt to devise a list of discussion questions each week to facilitate the presentation of each topic. A new feature this quarter will be the introduction of an empirical assignment applying a concept or technique from class that requires the use of a statistical package on a common dataset. I would encourage you to form study groups to discuss the papers, class assignments and project.

3. Course Resources and Requirements

There is no textbook for the course, although I have designed the course to be compatible with the future graduate-level text in financial econometrics by John Campbell, Andrew Lo and Craig MacKinlay. Several chapters are available in draft form. I will, however, form a packet of required readings which are listed in the outline below. This packet will be distributed to the students directly through the Department of Finance office in Hagerty Hall 318. I will strive to make available as many of the supplemental (non-required) readings as possible.

Prerequisites for the course include Business Finance 920 (Theory of Finance) and a series of empirical research tools courses, such as Economics 740/741/742 (Econometrics, Inference and Decision Analysis, General Linear Regression Analysis), Statistics 635 (Statistical Analysis of Time Series) and Statistics 755 (Multivariate Analysis). I expect that all students have completed the Qualifying Examination in Finance and therefore the Masters-level finance courses (Business Finance 821/822/823 or equivalent). The demands of this course are likely to be computation-intensive so that some rudimentary programming and data analysis skills are necessary.

4. Grades

A. Midterm Examination. This exam will comprise a take- home referee report on a recent working paper. I intend to hand this out in the end of the 6th week expecting a week-end turnover time. (15 percent)

B. Final Examination. This exam will take place during the scheduled time in the 11th week of the quarter and will last 2 hours. It is designed to act as a dry-run test for the Finance Field exam in July. (35 percent)

C. Classroom Presentation. Students are expected to participate actively in all classroom discussions. However, each student will act as discussion leader for one of the special topics sessions (selected in consultation with the instructor) in the 9th and 10th week of the quarter. The presentation should comprise a critical review of the study or studies presented. (20 percent)

D. Research Paper. Each student will be expected to produce an empirical research study on a topic selected in consultation with the instructor. This paper could represent a major initiative ideally or at least a replication of an existing study with a minor extension. The study should include an application of one of the techniques examined in the course. (30 percent)

The study questions with empirical assignments will not be graded, but should represent discussion points in class.

5. Background References

Students should also avail themselves with the following useful reference books:

Anderson, T., 1984, An Introduction to Multivariate Analysis. New York: John Wiley and Sons.

Bodie, Z., A. Kane and A. Marcus, 1993, Investments, Second Edition. New York: Richard D. Irwin.

Cox, J. and M. Rubinstein, 1985, Options Markets. New York: Prentice Hall.

Hamilton, J. D., 1994, Time Series Analysis, Princeton University Press.

Judge G., W. Griffiths, C. Hill, H. Lutkepohl, T. Lee, 1985, The Theory and Practice of Econometrics, Second Edition. New York: John Wiley and Sons.

Silvey, S. D., 1975, Statistical Inference. New York: Chapman and Hall.

6. Course Outline

The topics covered in the course are divided into 12 sections, as outlined below. We will cover the first five topics comprehensively in class. I will encourage the students to choose a topic from the remaining list for their presentations.

  1. Introduction
  2. The Random Character of Stock Market Prices
    • Unconditional Distributions
    • Conditional Distributions
      1. Conditional Means - Mean Reversion
      2. Conditional Means - Instrumental Variables
      3. Conditional Variances
    • Relationship between Means and Variances
    • Stock Prices and Volume
  3. Capital Asset Pricing Model
    • Unconditional Tests
    • Conditional Tests - Time Varying Means/Variances
  4. Arbitrage and Multifactor Asset Pricing Models
    • Unconditional Tests
    • Conditional Tests
  5. Consumption and Production Based Asset Pricing Models
    • Consumption Based Models
    • State Nonseparable Consumption Models
    • Habit Formation Models
    • Production Based Models
  6. Efficient Markets Hypothesis
    • Variance Bounds Tests
    • Anomalies
    • Cross-Asset Relationships/Overreaction Hypothesis
  7. Market Microstructure
    • Institutional Aspects
    • Measurement Biases
    • Bid-Ask Spreads and Price Discreteness
  8. Event Study Methodology
  9. Portfolio Performance Evaluation
  10. Fixed Income Securities
    • Term Structure of Interest Rates
    • Pricing Debt with Default Risk
  11. Pricing Options, Futures and Other Derivative Assets
    • Option Pricing Models
    • Futures and Forward Prices
  12. Non-Standard Approaches in Finance
  13. Chaos and Nonlinear Dynamics in Stock Returns
  14. Technical Trading Rules

7. References

The references below are classified into three categories: denotes a required reading that will be discussed in class, , a supplemental reading, and represents a background methodological article that students should attempt to read.

I. Introduction

Cox, D., 1990, "Role of Models in Statistical Analysis," Statistical Science 5, 169-174.

McCloskey, 1985, "The Loss Function has been Mislaid: The Rhetoric of Significance Tests," American Economic Review 75, 201-205.

Leamer, E., 1983, "Let's Take the Con Out of Econometrics," American Economic Review 73, 31-43.

Silvey, S. D., 1975, Statistical Inference, Chapter 1. London: Chapman and Hall.

II. The Random Character of Stock Market Prices

A. Unconditional Distributions

Bachelier, L., 1900, "Theorie de la Speculation," Annales de l'Ecole Normale Superieure 3, Gauthier-Villars, Paris.

Blattberg, R. and N. Gonedes, 1974, "A Comparison of the Stable and Student Distributions as Statistical Models for Stock Prices," Journal of Business 47, 244-280.

Cootner, P., ed., 1964, The Random Character of Stock Market Prices, Cambridge, MA: MIT Press.

Fama, E., 1976, Foundations of Finance. New York: Basic Books. Chapters 1 and 2.

Fama, E., 1965, "The Behavior of Stock Prices," Journal of Business 38, 34-105.

Harris, L., 1986, "A Transactions Data Study of Weekly and Intradaily Patterns in Stock Returns," Journal of Financial Economics 16, 99-117.

Kon, S., 1984, "Models of Stock Returns: A Comparison," Journal of Finance 39, 148-165.

Taylor, S., 1986, Modeling Financial Time Series, London: John Wiley & Sons, Ch. 2.

B. Conditional Distributions

B.1 Conditional Means - Mean Reversion

Boudoukh, J., M. Richardson and R. Whitelaw, 1994, "A Tale of Three Schools: Insights on Autocorrelations of Short-Horizon Stock Returns," Review of Financial Studies 7, 539-573.

Conrad, J. and G. Kaul, 1988, "Time Variation in Expected Returns," Journal of Busines, 409-426.

Fama, E. and K. French, 1988, "Permanent and Temporary Components of Stock Prices," Journal of Political Economy 96, 246-273.

Kim, M., C. Nelson, and R. Startz, 1991, "Mean Reversion in Stock Prices: Evidence and Implications," Review of Economic Studies 58, 515-528.

Lo, A., 1991, "Long-Term Memory in Stock Market Prices," Econometrica 59, 1279-1313.

Lo, A. and C. MacKinlay, 1988, "Stock Market Prices Do Not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies 1, 41-66.

Lo, A. and C. MacKinlay, 1993, "The Predictability of Asset Returns: Chapter 2," forthcoming in The Econometrics of Financial Markets, working paper, MIT.

Poterba, J. and L. Summers, 1988, "Mean Reversion in Stock Returns: Evidence and Implications," Journal of Financial Economics 22, 27-60.

Richardson, M. and J. Stock, 1990, "Drawing Inferences From Statistics Based on Multiyear Asset Returns," Journal of Financial Economics 25, 323-348.

Kandel, S. and R. Stambaugh, 1988, "Modeling Expected Stock Returns for Long and Short Horizons," Rodney L. White Center Working Paper No. 42-88, Wharton School, University of Pennsylvania.

Dickey, D. and W. Fuller, 1981, "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root" Econometrica 49, 1057-1072.

Lo, A. and C. MacKinlay, 1989, "The Size and Power of the Variance Ratio Test in Finite Samples: A Monte Carlo Investigation," Journal of Econometrics 40, 203-238.

Schwert, G., 1989, "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business and Economics Statistics 7, 147-160.

B.2 Conditional Means - Instrumental Variables

Fama, E. and K. French, 1988, "Dividend Yields and Expected Stock Returns," Journal of Financial Economics 22, 3- 26.

Fama, E. and K. French, 1989, "Business Conditions and Expected Returns on Stocks and Bonds," Journal of Financial Economics 25, 23-50.

Fama, E. and M. Gibbons, 1982, "Inflation, Real Returns and Capital Investment," Journal of Monetary Economics 9, 297- 323.

Fama, E. and W. Schwert, 1977, "Asset Returns and Inflation," Journal of Financial Economics 5, 115-146.

Keim, D. and R. Stambaugh, 1986, "Predicting Returns in the Stock and Bond Markets," Journal of Financial Economics 17, 357-390.

B.3 Conditional Variances

Akgiray, V., 1989, "Conditional Heteroscedasticity in Time Series of Stock Returns," Journal of Business 62, 55-80.

Bollerslev, T., 1986, "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," Review of Economics and Statistics 69, 542-547.

Christie, A., 1982, "The Stochastic Behavior of Common Stock Variances: Value, Leverage and Interest Rate Effects," Journal of Financial Economics 10, 407-432.

French, K. and R. Roll, 1986, "Stock Return Variances: The Arrival of Information and the Reaction of Traders," Journal of Financial Economics 17, 5-26.

Pagan, A. and G. Schwert, 1990, "Alternative Models for Conditional Stock Volatility," Journal of Econometrics 45, 267-290.

Schwert, G., 1990, "Why Does Stock Market Volatility Change Over Time," Journal of Finance 44, 1115-1153.

Bollerslev, T., 1986, "Generalized Autoregressive Conditional Heteroscedasticity," Journal of Econometrics 31, 307-327.

Bollerslev, T., Chou, R. and K.Kroner, 1990, "ARCH Modeling in Finance: A Review of the Theory and Empirical Evidence," Journal of Econometrics 52, 5-59.

Engle, R., 1982, "Autoregressive Conditional Heteroskedasticity with Estimates of the Variance of U.K. Inflation," Econometrica 50, 987-1008.

B.4 Relationship between Conditional Means and Variances

French, K., Schwert, W. and R. Stambaugh, 1987, "Expected Stock Returns and Volatility," Journal of Financial Economics 19, 3-30.

Hamao Y., R. Masulis and V. Ng, 1990, "Correlations in Price Changes and Volatility Across International Stock Markets," Review of Financial Studies 3, 281-307.

Merton, R., 1980, "On Estimating the Expected Return on the Market," Journal of Financial Economics 8, 323-362.

Nelson, D., 1991, "Conditional Heteroscedasticty in Asset Returns:A New Approach," Econometrica 59, 347-370.

Chou, R., 1988, "Volatility Persistence and Stock Valuations," Journal of Applied Econometrics 3, 279-294.

Pagan, A. and A. Ullah, 1988, "The Econometric Analysis of Models with Risk Terms," Journal of Applied Econometrics 3, 87-105.

C. Stock Returns and Volume

Andersen, T., 1993, "Return Volatility and Trading Volume: An Information Flow Interpretation of Stochastic Volatility," working paper, Kellogg School of Management, Northwestern University.

Campbell, J., Grossman, S. and J. Wang, 1993, "Trading Volume and Serial Correlation," Quarterly Journal of Economics 108, 905-939.

Gallant, R., Rossi, P. and G. Tauchen, 1992, "Stock Prices and Volume," Review of Financial Studies 5, 199-242.

Harris, L., 1987, "Transactions Data Tests of the Mixture of Distributions Hypothesis," Journal of Financial and Quantitative Analysis 22, 127-141.

Jones, C., G. Kaul and M. Lipson, "Transactions, Volume and Volatility," Review of Financial Studies 7, 631-651.

Karpoff, J., 1987, "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis 22, 109-126.

Lamoureux, C. and W. Lastrapes, 1990, "Heteroscedasticity in Stock Return Data: Volume vs. GARCH Effects," Journal of Finance 46, 221-229.

Tauchen, G. and M. Pitts, 1983, "The Price Variability- Volume Relationship on Speculative Markets," Econometrica 51, 485-505.

Westerfield, R., 1977, "The Distribution of Common Stock Price Changes: An Application of Transactions Time and Subordinated Stochastic Models," Journal of Financial and Quantitative Analysis 12, 743-765.

III. The Capital Asset Pricing Model

A. Unconditional Tests

Black, F., Jensen, M. and M. Scholes, 1972, "The Capital Asset Pricing Model: Some Empirical Tests," in M. Jensen ed., Studies in the Theory of Capital Markets. New York: Praeger.

Fama, E., 1976, Foundations of Finance. New York: Basic Books. Chapters 9.

Fama, E. and J. MacBeth, 1973, "Risk, Return, and Equilibrium: Empirical Tests," Journal of Political Economy 91, 607-636.

Fama, E. and K. French, 1992, "The Cross-Section of Expected Stock Returns," Journal of Finance 47, 427-465.

Gibbons, M., 1982, "Multivariate Tests of Financial Models: A New Approach," Journal of Financial Economics 10, 3- 27.

Gibbons, M., Ross, S. and J. Shanken, 1989, "A Test of the Efficiency of a Given Portfolio," Econometrica 57, 1121- 1152.

Huberman, G. and S. Kandel, 1988, "Mean-Variance Spanning," Journal of Finance 43, 873-888.

Kandel, S., 1985, "The Likelihood Ratio Test Statistic of Mean-Variance Efficiency of a Given Portfolio," Journal of Financial Economics 13, 575-592.

Kothari, S., J. Shanken and R. Sloan, "Another Look at the Cross-section of Expected Stock Returns," working paper, University of Rochester, forthcoming Journal of Finance.

Lo, A. and C. MacKinlay, 1990, "Data Snooping Biases in Tests of Financial Asset Pricing Models," Review of Financial Studies 3, 431-468.

MacKinlay, C., 1987, "On Multivariate Tests of the CAPM," Journal of Financial Economics 18, 341-371.

Roll, R., 1977, "A Critique of the Asset Pricing Theory's Tests Part 1: On Past and Potential Testability of the Theory," Journal of Financial Economics 4, 129-176.

Shanken, J., 1985, "Multivariate Tests of the Zero-Beta CAPM," Journal of Financial Economics 14, 327-348.

Stambaugh, R., 1982, "On the Exclusion of Assets from the Two-Parameter Model: A Sensitivity Analysis," Journal of Financial Economics 10, 237-268.

Anderson, T., 1984, An Introduction to Multivariate Statistical Analysis, New York: John Wiley and Sons, Chapter 5.

Buse, A., 1982, "The Likelihood Ratio, Wald and Lagrange Multiplier Tests: An Expository Note," American Statistician 36, 153-157.

B. Conditional Tests with Time Varying Means and Variances

Bollerslev, T., R. Engle and J. Wooldridge, 1988, "A Capital Asset Pricing Model with Time Varying Covariances," Journal of Political Economy 96, 116-131.

Chan, K.C., G.A. Karolyi and R. Stulz, 1992, "Global Financial Markets and the Risk Premium on U.S. Equity," Journal of Financial Economics 32, 137-168.

Ferson, W., 1993, "Theory and Empirical Testing of Asset Pricing Models," forthcoming in The Finance Handbook, Jarrow, R., W. Ziemba and V. Maksimovic, (eds), North-Holland Publishers.

Ferson, W., S. Kandel and R. Stambaugh, 1987, "Tests of Asset Pricing with Time-Varying Expected Risk Premiums and Market Betas," Journal of Finance 42, 201-220.

Ferson, W., S. Foerster, and D. Keim, 1993, "General Tests of Latent Variable Models and Mean-Variance Spanning," Journal of Finance 48, 131-155.

Gibbons, M. and W. Ferson, 1985, "Testing Asset Pricing Models with Changing Expectations and an Unobservable Market Portfolio," Journal of Financial Economics 14, 217-236.

Harvey, C., 1989, "Time Varying Conditional Covariances in Tests of Asset Pricing Models," Journal of Financial Economics 24, 289-317.

Harvey, C., 1991, "The World Price of Covariance Risk," Journal of Finance 46,111-157.

Duffie, D. and K. Singleton, 1991, "Simulated Moments Estimation of Markov Models of Asset Prices," working paper, Stanford University.

Hansen, L., 1982, "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica 50, 1029-1054.

Hansen, L. and K. Singleton, 1982, "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica 50, 1269-1286. (Errata in Volume 52, 267-268.)

IV. The Arbitrage Pricing Theory

A. Unconditional Tests

Chan, K.C., N. Chen and D. Hsieh, 1985, "An Exploratory Investigation of the Firm Size Effect," Journal of Financial Economics 14, 451-471.

Chen, N., 1983, "Some Empirical Tests of Arbitrage Pricing," Journal of Finance 38, 1393-1414.

Chen, N., Roll, R. and S. Ross, 1986, "Economic Forces and the Stock Market: Testing the APT and Alternative Asset Pricing Theories," Journal of Business 59, 383-403.

Connor, G. and R. Korajczyk, 1988, "Risk and Return in an Equilibrium APT: Application of a New Test Methodology," Journal of Financial Economics 21, 255-289.

Dhrymes, P., Friend, I., Gultekin, B. and M. Gultekin, 1984, "A Critical Reexamination of the Empirical Evidence on the Arbitrage Pricing Theory," Journal of Finance 39, 323- 346.

Dybvig, P. and S. Ross, 1985, "Yes, the APT is Testable," Journal of Finance 40, 1173-1188.

Huberman, G., S. Kandel and R. Stambaugh, 1987, "Mimicking Portfolios and Exact Arbitrage Pricing," Journal of Finance 42, 1-10.

Lehmann, B. and D. Modest, 1988, "The Empirical Foundations of the Arbitrage Pricing Theory," Journal of Financial Economics 21, 213-254.

Roll, R. and S. Ross, 1980, "An Empirical Investigation of the Arbitrage Pricing Theory," Journal of Finance 35, 1073- 1103.

Roll, R. and S. Ross, 1984, "A Critical Reexamination of the Empirical Evidence on the Arbitrage Pricing Theory: A Reply," Journal of Finance 39, 347-350.

Shanken, J., 1982, "The Arbitrage Pricing Theory: Is It Testable?" Journal of Finance 37, 1129-1140.

Shanken, J., 1985, "Multi-Beta CAPM or Equilibrium APT?: A Reply," Journal of Finance 40, 1189-1196.

Shukla, R. and C. Trzcinka, 1990, "Sequential Tests of the Arbitrage Pricing Theory: A Comparison of Principal Components and Maximum Likelihood Factors," Journal of Finance 45, 1541- 1564.

Trzcinka, C., 1986, "On the Number of Factors in the Arbitrage Pricing Model," Journal of Finance 41, 347-368.

Anderson, T., 1984, An Introduction to Multivariate Statistical Analysis, New York: John Wiley and Sons, Chapter 11 and 14.

B. Conditional Tests and Extensions

Bansal, R. and S. Viswanathan, 1993, "No Arbitrage and Arbitrage Pricing: A New Approach," Journal of Finance 48, 1231-1261.

Bansal, R., D. Hsieh, and S. Viswanathan, 1993, "A New Approach to International Arbitrage Pricing," Journal of Finance 48, 1719-1747..

Carhart, M., R. Stevens, 1994, "Testing Conditional Asset Pricing Models," working paper, GSB University of Chicago.

Connor, G. and R. Korajczyk, 1992, "The Arbitrage Pricing Theory and Multifactor Models of Asset Returns," working paper, Northwestern University, Sections IV - VI.

Ferson, W. and C. Harvey, 1991, "The Variation of Economic Risk Premiums," Journal of Political Economy 99, 385-415.

Kan, R. and C. Zhang, 1994, "A Test of Conditional Asset Pricing Models," working paper, University of Toronto.

V. Consumption and Production Based Asset Pricing Models

A. Consumption Based Models

Breeden, D., Gibbons, M. and R. Litzenberger, 1989, "Empirical Tests of the Consumption Oriented CAPM", Journal of Finance 44, 231-262.

Brown, D. and M. Gibbons, 1985, "A Simple Econometric Approach for Utility-Based Asset Pricing Models," Journal of Finance 40, 359-381.

Campbell, J., A. Lo and C. MacKinlay, 1993, "Chapter 8: Testing Euler Equations" in The Econometrics of Financial Markets, working paper, MIT.

Cecchetti, S., P.S. Lam and N. Mark, 1994, "Testing Volatility Restrictions on Intertemporal Marginal Rates of Substitution Implied by Euler Equations and Asset Returns," Journal of Finance 49, 123-152.

Ferson, W. and C. Harvey, 1992, "Seasonality and Consumption-based Asset Pricing," Journal of Finance 47, 511- 552.

Ferson, W. and J. Merrick, 1987, "Non-stationarity and Stage of the Business Cycle Effects in Consumption-based Asset Pricing Relations," Journal of Financial Economics 18, 127- 146.

Grossman, S., A. Melino and R. Shiller, 1987, "Estimating the Continuous Time Consumption Based Asset Pricing Model," Journal of Business and Economic Statistics 5, 315-327.

Hansen, L. and R. Jagannathan, 1991, "Implications of Security Market Data for Models of Dynamic Economies," Journal of Political Economy 99, 225-262.

Hansen, L. and R. Jagannathan, 1992, "Assessing Specification Errors in Stochastic Discount Factor Models," working paper, University of Minnesota.

Hansen, L. and K. Singleton, 1982, "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica 50, 1269-1286.

Hansen, L. and K. Singleton, 1983, "Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns," Journal of Political Economy 91, 249-265.

Wheatley, S., 1989, "Some Tests of the Consumption-based Asset Pricing Model," Journal of Monetary Economics 22, 193- 215.

State Nonseparable Preferences

Epstein, L. and S. Zin, 1989, "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica 57, 937- 969.

Epstein, L. and S. Zin, 1991, "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis," Journal of Political Economy 99, 263-286.

Habit Formation Models

Mehra, R. and E. Prescott, 1985, "The Equity Premium Puzzle," Journal of Monetary Economics 15, 145-161.

Constantinides, G., 1990, "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy 98, 519-543.

Ferson, W. and G. Constantinides, 1991, "Habit Persistence and Durability in Aggregate Consumption: Empirical Tests," Journal of Financial Economics 29, 199-240.

Heaton, J., 1991, "An Empirical Investigation of Asset Pricing with Temporally Dependent Preference Specifications," working paper, MIT, forthcoming Econometrica.

D. Production Based Models

Braun, P., 1992, "Asset Pricing and Capital Investment: Theory and Evidence," working paper, Northwestern University.

Cochrane, J., 1991, "Production-based Asset Pricing and the Link between Stock Returns and Economic Fluctuations," Journal of Finance 46, 207-234.

VI. The Efficient Markets Hypothesis

Fama, E., 1976, Foundations of Finance. New York: Basic Books. Chapter 5.

Fama, E., 1970, "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance 25, 383-417.

Fama, E., 1991, "Efficient Capital Markets: II," Journal of Finance 46, 1575-1617.

Grossman, S., 1989, The Informational Role of Prices. Cambridge: MIT. Press.

Grossman, S. and J. Stiglitz, 1980, "On the Impossibility of Informationally Efficient Markets," American Economic Review 70, 393-408.

A. Variance Bounds Tests

Ackert, L. and B. Smith, 1993, "Stock Price Volatility, Ordinary Dividends, and Other Cash Flows to Shareholders," Journal of Finance 48, 1147-1159.

Bollerslev, T. and R. Hodrick, 1992, "Financial Market Efficiency Tests," forthcoming in The Handbook of Applied Econometrics, I, Macroeconomics, M. Pesaran and R. Wickins (eds), North-Holland Publishers.

Campbell, J., A. Lo and C. MacKinlay, 1993, "Chapter 7: Testing Present Value Relations" in The Econometrics of Financial Markets, working paper, MIT.

Campbell, J. and R. Shiller, 1987, "Co-integration and Tests of Present Value Models," Journal of Political Economy 95, 1062-1088.

Flavin, M., 1983, "Excess Volatility in the Financial Markets: A Reassessment of the Empirical Evidence," Journal of Political Economy 91, 929-956.

Gilles, C. and S. LeRoy, 1991, "Econometric Aspects of the Variance-Bounds Tests: A Survey," Review of Financial Studies 4, 753-792.

Kleidon, A., 1986, "Variance Bounds Tests and Stock Price Valuation Models," Journal of Political Economy 94, 953- 1001.

Kothari, S. and J. Shanken, 1992, "Stock Return Variation and Expected Dividends: A Time-Series and Cross-Sectional Analysis," Journal of Financial Economics 31, 177-210.

LeRoy, S., 1989, "Efficient Capital Markets and Martingales," Journal of Economic Literature 27, 1583-1621.

LeRoy, S. and R. Porter, 1981, "The Present Value Relation: Tests Based on Variance Bounds," Econometrica 49, 555-574.

Marsh, T. and R. Merton, 1986, "Dividend Variability and Variance Bounds Tests for the Rationality of Stock Market Prices," American Economic Review 76, 483-498.

Michener, R., 1982, "Variance Bounds in a Simple Model of Asset Pricing," Journal of Political Economy 90, 166-175.

Schwert, W., 1991, "Review of Market Volatility by Robert J. Shiller," Journal of Portfolio Management 17, 74-78.

Shiller, R., 1981, "Do Stock Prices Move Too Much To Be Justified By Subsequent Changes in Dividends?" American Economic Review 71, 421-436.

West, K., 1988, "Dividend Innovations and Stock Price Volatility," Econometrica 56, 37-61.

Engle, R. and C. Granger, 1987, "Co-Integration and Error Correction: Representation, Estimation and Testing," Econometrica 55, 251-276.

Johansen, S., 1988, "Statistical Analysis of Cointegrating Vectors," Journal of Economics, Dynamics and Control 12, 231- 254.

Johansen, S., 1991, "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica 59, 1551-1581.

B. Anomalies

Ariel, R., 1990, "High Stock Returns Before Holidays: Existence and Evidence on Possible Causes," Journal of Finance 45, 1611-1626.

Banz, R., 1981, "The Relationship Between Return and Market Value of Common Stock," Journal of Financial Economics 9, 3-18.

Keim, D., 1983, "Size-Related Anomalies and Stock Return Seasonality: Further Empirical Evidence," Journal of Financial Economics 12, 13-32.

Lakonishok, J. and S. Smidt, 1988, "Are Seasonal Anomalies Real? A Ninety-Year Perspective," Review of Financial Studies 1, 403-427.

Reinganum, M., 1981, "Misspecification of Capital Asset Pricing: Empirical Anomalies Based on Earnings Yields and Market Values," Journal of Financial Economics 9, 19-46.

Rosenberg, B., Reid, K. and R. Lanstein, 1985, "Persuasive Evidence of Market Inefficiency," Journal of Portfolio Management 12, 9-16.

C. Cross-Asset Relationships and the Overreaction Hypothesis

Arbanell, J. and V. Bernard, 1992, "Tests of Analysts' Overreaction/Underreaction to Earnings Information as an Explanation for Anomalous Stock Price Behavior," Journal of Finance 47, 1181-1207.

Ball, R. and S. Kothari, 1989, "Nonstationary Expected Returns: Implications for Tests of Market Efficiency and Serial Correlation in Returns," Journal of Financial Economics 25, 51-74.

Chan, K.C., 1988, "On the Contrarian Investment Strategy," Journal of Business 61, 147-163.

Chopra, N., Lakonishok, J. and J. Ritter, 1992, "Measuring Abnormal Performance: Do Stocks Overreact?" Journal of Financial Economics 31, 235-268.

DeBondt, W. and R. Thaler, 1985, "Does the Stock Market Overreact?" Journal of Finance 40, 793-805.

DeBondt, W. and R. Thaler, 1987, "Further Evidence of Investor Overreaction and Stock Market Seasonality," Journal of Finance 42, 557-581.

Jegadeesh, N. and S. Titman, 1993, "Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency," Journal of Finance 48, 65-91.

Jegadeesh, N. and S. Titman, 1991, "Short horizon Returns Reversals and the Bid-Ask Spread," working paper, University of California at Los Angeles.

Lehmann, B., 1990, "Fads, Martingales, and Market Efficiency," Quarterly Journal of Economics 105, 1-28.

Lo, A. and C. MacKinlay, 1990, "When Are Contrarian Profits Due to Stock Market Overreaction?" Review of Financial Studies 3, 175-207.

Zarowin, P., 1990, "Size, Seasonality and Stock Market Overreaction," Journal of Financial and Quantitative Analysis 25, 113-125.

VII. Market Microstructure

Campbell, J., A. Lo and C. MacKinlay, "Chapter 3: Aspects of Market Microstructure" in The Econometrics of Financial Markets, working paper, MIT.

A. Institutional Aspects

Amihud, Y. and H. Mendelson, 1987, "Trading Mechanisms and Stock Returns: An Empirical Investigation," Journal of Finance 42, 533-553.

Blume, M., MacKinlay, C. and B. Terker, 1989, "Order Imbalances and Stock Prices Movements on October 19 and 20, 1987," Journal of Finance 44, 827-848.

Christie, W. and P. Schultz, 1994, "Why do NASDAQ Market- makers Avoid Odd-Eighth Quotes?" Journal of Finance 49, 1813- 1840.

Cohen, K., Maier, S., Schwartz, R. and D. Whitcomb, 1986, The Microstructure of Securities Markets. New Jersey: Prentice-Hall.

Foster, D. and S. Viswanathan, 1993, "Variations in Trading Volume, Return Volatility and Trading Costs," Journal of Finance 48, 187-211.

Hasbrouck, J., 1988, "Trades, Quotes, Inventories and Information," Journal of Financial Economics 22, 229-252.

Hasbrouck, J., 1991, "Measuring the Information Content of Stock Trades," Journal of Finance 46, 176-208.

Hasbrouck, J. and T. Ho, 1987, "Order Arrival, Quote Behavior, and the Return-Generating Process," Journal of Finance 42, 1035-1048.

Lee, C. and M. Ready, 1991, "Inferring Trade Direction from Intraday Data," Journal of Finance 46, 733-746.

Madhavan, A. and S. Smidt, 1991, "A Bayesian Model of Intraday Specialist Pricing," Journal of Financial Economics 30, 99-134.

RFS/WFA/NYSE Symposium on Market Microstructure, 1991, Volume 4, No. 3 of Review of Financial Studies.

Wood, R., McInish, T. and K. Ord, 1985, "An Investigation of Transactions Data for NYSE Stocks," Journal of Finance 40, 723-738.

B. Measurement Biases

Ball, C., 1988, "Estimation Bias Induced by Discrete Security Prices," Journal of Finance 43, 841-865.

Blume, M. and R. Stambaugh, 1983, "Biases in Computed Returns: An Application to the Size Effect," Journal of Financial Economics 12, 387-404.

Dimson, E., 1979, "Risk Measurement when Shares are Subject to Infrequent Trading," Journal of Financial Economics 7, 197-226.

Fisher, L., 1966, "Some New Stock Market Indexes," Journal of Business 39, 191-225.

Fowler, D. and C. Rorke, 1983, "Risk Measurement when Shares are Subject to Infrequent Trading: Comment," Journal of Financial Economics 12, 279-283.

Lo, A. and C. MacKinlay, 1990, "An Econometric Analysis of Non-Synchronous Trading," Journal of Econometrics 45, 181- 212.

Roll, R., 1983, "On Computing Mean Returns and the Small Firm Premium," Journal of Financial Economics 12, 371-387.

Scholes, M. and J. Williams, 1977, "Estimating Beta From Non-Synchronous Data," Journal of Financial Economics 5, 309- 327.

C. Bid-Ask Spreads and Price Discreteness

George, T., G. Kaul and M. Nimalendran, 1991, "Estimation of the Bid-Ask Spread and its Components: A New Approach," Review of Financial Studies 4, 623-656.

Glosten, L. and L. Harris, 1988, "Estimating the Components of the Bid/Ask Spread," Journal of Financial Economics 21, 123-142.

Harris, L., 1991, "Stock Price Clustering and Discreteness," Review of Financial Studies 5, 389-415.

Hausman, J., Lo, A. and C. MacKinlay, 1991, "An Ordered Probit Analysis of Transaction Stock Prices," Journal of Financial Economics 31, 319-379.

Roll, R., 1984, "A Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market," Journal of Finance 39, 1127-1139.

VIII. Event Study Methodology Ball, C. and W. Torous, 1988, "Investigating Security Price Performance in the Presence of Event Date Uncertainty," Journal of Financial Economics 22, 123-154.

Binder, J., 1985, "On the Use of the Multivariate Regression Model in Event Studies," Journal of Accounting Research 23, 370-383.

Boehmer, E., Musumeci, J. and A. Poulsen, 1991, "Event- Study Methodology Under Conditions of Event-Induced Variance," Journal of Financial Economics 30, 253-272.

Brown, S. and J. Warner, 1985, "Using Daily Stock Returns: The Case of Event Studies," Journal of Financial Economics 14, 3-31.

Fama, E., 1976, Foundations of Finance. New York: Basic Books. Chapters 3 and 4.

Fama, E., Fisher, L., Jensen, M. and R. Roll, 1969, "The Adjustment of Stock Prices to New Information," International Economic Review 10, 1-21.

Malatesta, P., 1986, "Measuring Abnormal Performance: The Event Parameter Approach Using Joint Generalized Least Squares," Journal of Financial and Quantitative Analysis 21, 27-38.

Sefcik, S. and R. Thompson, 1986, "An Approach to Statistical Inference in Cross-sectional Models with Security Abnormal Returns as Dependent Variable," Journal of Accounting Research 24, 316-334.

Thompson, R., 1985, "Conditioning the Return-Generating Process on Firm Specific Events: A Discussion of Event Study Methods," Journal of Financial and Quantitative Analysis 20, 151-168.

IX. Performance Evaluation

Admati, A. and S. Ross, 1985, "Measuring Investment Performance in a Rational Expectations Equilibrium Model," Journal of Business 58, 1-26.

Admati, A., Bhattacharya, S., Pfleiderer, P. and S. Ross, 1986, "On Timing and Selectivity," Journal of Finance 41, 715- 730.

Brown, S., Goetzmann, W., Ibbotson, R. and S. Ross, 1992, "Survivorship Bias in Performance Studies," Review of Financial Studies 5, 553-580.

Connor, G. and R. Korajczyk, 1986, "Performance Measurement with the Arbitrage Pricing Theory: A New Framework for Analysis," Journal of Financial Economics 15, 373-394.

Cumby, R. and D. Modest, 1987, "Testing for Market Timing Ability: A Framework for Forecast Evaluation," Journal of Financial Economics 19, 169-190.

Dybvig, P. and S. Ross, 1985, "Differential Information and Performance Measurement Using a Security Market Line," Journal of Finance 40, 383-399.

Grinblatt, M. and S. Titman, 1989, "Mutual Fund Performance: An Analysis of Quarterly Portfolio Holdings," Journal of Business 62, 393-416.

Grinblatt, M. and S. Titman, 1989, "Portfolio Performance Evaluation: Old Issues and New Insights," Review of Financial Studies 2, 393-422.

Grinblatt, M. and S. Titman, 1993, "Performance Measurement without Benchmarks: An Examination of Mutual Fund Returns," Journal of Business 66, 47-68.

Hendricks, D., J. Patel and R. Zeckhauser, 1993, "Hot Hands in Mutual Funds: Short-run Persistence of Relative Performance, 1974-1988" Journal of Finance 48, 93-130.

Henriksson, R. and R. Merton, 1981, "On Market Timing and Investment Performance II: Statistical Procedures for Evaluating Forecasting Skills," Journal of Business 54, 513- 533.

Jobson, J. and R. Korkie, 1981, "Performance Hypothesis Testing with the Sharpe and Treynor Measures," Journal of Finance 36, 889-908.

Mayers, D. and E. Rice, 1979, "Measuring Portfolio Performance and the Empirical Content of Asset Pricing Models," Journal of Financial Economics, 7, 3-29.

Merton, R., 1981, "On Market Timing and Investment Performance I: An Equilibrium Theory of Value for Market Forecasts," Journal of Business 54, 363-406.

Roll, R., 1978, "Ambiguity When Performance is Measured by the Securities Market Line," Journal of Finance 33, 1051- 1069.

Roll, R., 1979, "A Reply to Mayers and Rice," Journal of Financial Economics 7, 391-400.

Sharpe, W., 1966, "Mutual Fund Performance," Journal of Business 39, 119-138.

Treynor, J., 1965, "How to Rate Management of Investment Funds," Harvard Business Review 43, 63-75.

Treynor, J. and F. Mazuy, 1966, "Can Mutual Funds Outguess the Market?" Harvard Business Review 44, 131-136.

X. Fixed Income Securities

Campbell, J., A. Lo and C. MacKinlay, "Chapter 10: An Introduction to Fixed-Income Securities" in The Econometrics of Financial Markets, working paper, MIT.

A. The Term Structure of Interest Rates

Brennan, M. and E. Schwartz, 1977, "Savings Bonds, Retractable Bonds and Callable Bonds," Journal of Financial Economics 5, 67-88.

Brown, S. and P. Dybvig, 1986, "The Empirical Implications of the Cox, Ingersoll, Ross Theory of the Term Structure of Interest Rates," Journal of Finance 41, 617-632.

Campbell, J., 1986, "A Defense for the Traditional Hypotheses about the Term Structure of Interest Rates," Journal of Finance 36, 769-800.

Campbell, J. and J. Ammer, 1993, "What Moves the Stock and Bond Markets? A Variance Decomposition for Long-term Asset Returns," Journal of Finance 48, 3-37.

Chan, K.C., G.A. Karolyi, F. Longstaff and A. Sanders, 1992, "An Empirical Comparison of Alternative Models of the Short-term Interest Rate," Journal of Finance 47, 1209- 1228.

Cox, J., Ingersoll, J. and S. Ross, 1981, "A Re- examination of Traditional Hypotheses About the Term Structure of Interest Rates," Journal of Finance 36, 769-799.

Fama, E., 1984, "The Information in the Term Structure," Journal of Financial Economics 13, 509-528.

Fama, E. and R. Bliss, 1987, "The Information in Long- Maturity Forward Rates," American Economic Review 77, 680- 692.

Gibbons, M. and K. Ramaswamy, 1993, "The Term Structure of Interest Rates: Empirical Evidence," Review of Financial Studies 6, 619-658.

Ho, T. and S. Lee, 1986, "Term Structure Movements and Pricing Interest Rate Contingent Claims," Journal of Finance 41, 1011-1029.

Longstaff, F., 1989, "A Nonlinear General Equilibrium Model of the Term Structure of Interest Rates," Journal of Financial Economics 23, 195-224.

Longstaff, F. and E. Schwartz, 1992, "Interest Rate Volatility and the Term Structure: A Two-Factor General Equilibrium Model," Journal of Finance 47, 1259-1282.

McCulloch, H., 1990, "U.S. Government Term Structure Data," Appendix to R. Shiller, "The Term Structure of Interest Rates," forthcoming in Benjamin M. Friedman and Frank H. Hahn, eds., Handbook of Monetary Economics. Amsterdam: North-Holland.

Pearson, N. and T. Sun, 1991, "An Empirical Examination of the Cox, Ingersoll and Ross Model of the Term Structure of Interest Rates," Journal of Finance 49, 1279-1297.

Pennacchi, G., 1991, "Identifying the Dynamics of Real Interest Rates and Inflation: Evidence Using Survey Data," Review of Financial Studies 4, 53-86.

Stambaugh, R., 1988, "The Information in Forward Rates: Implications for Models of the Term Structure," Journal of Financial Economics 21, 41-70.

Sun, T., 1992, "Real and Nominal Interest Rates: A Discrete-Time Model and Its Continuous-Time Limit," Review of Financial Studies 5, 581-611.

B. Pricing Debt with Default Risk

Altman, E., 1989, "Measuring Corporate Bond Mortality and Performance," Journal of Finance 44, 909-922.

Asquith, P., Mullins, D. and E. Wolff, 1989, "Original Issue High Yield Bonds: Aging Analysis of Defaults, Exchanges and Calls," Journal of Finance 44, 923-952.

Blume, M., Keim, D. and S. Patel, 1991, "Returns and Volatility of Low-Grade Bonds, 1977-1989," Journal of Finance 46, 49-74.

Kaplan, R. and G. Urwitz, 1979, "Statistical Models of Bond Ratings: A Methodological Inquiry," Journal of Business 52, 231-262.

Lo, A., 1986, "Logit Versus Discriminant Analysis: A Specification Test with Applications to Corporate Bankruptcies," Journal of Econometrics 31, 151-178.

XI. Pricing Options, Futures and Other Derivative Assets

Campbell, J., A. Lo and C. MacKinlay, "Chapter 12: Implementing Derivative Pricing Models" in The Econometrics of Financial Markets, working paper, MIT.

A. Option Pricing Models

Ball, C. and W. Torous, 1985, "On Jumps in Common Stock Prices and Their Impact on Call Option Pricing," Journal of Finance 40, 155-174.

Bates, D., 1991, "The Crash of `87: Was It Expected? The Evidence from Options Markets," Journal of Finance 46, 1009- 1044.

Bhattacharya, M., 1983, "Transaction Data Tests of the Efficiency of the Chicago Board Options Exchange," Journal of Financial Economics 12, 161-185.

Cox, J. and S. Ross, 1976, "The Valuation of Options for Alternative Stochastics Processes," Journal of Financial Economics 3, 145-166.

Cox, J., Ross, S. and M. Rubinstein, 1979, "Option Pricing: A Simplified Approach," Journal of Financial Economics 7, 229-263.

Cox, J. and M. Rubinstein, 1985, Options Markets, Prentice Hall. Chapter 6.

Grundy, B., 1991, "Option Prices and the Underlying Asset's Return Distribution," Journal of Finance 46, 1045- 1070.

Hull, J. and A. White, 1987, "The Pricing of Options on Assets with Stochastic Volatilities," Journal of Finance 42, 281-300.

Karolyi, G.A., 1993, "A Bayesian Model of Stock Return Volatility for Option Valuation," Journal of Financial and Quantitative Analysis, 579-594.

Latane, H. and R. Rendleman, 1976, "Standard Deviations of Stock Price Ratios Implied in Options Prices," Journal of Finance 31, 369-381.

Lo, A., 1986, "Statistical Tests of Contingent Claims Asset-Pricing Models: A New Methodology," Journal of Financial Economics 17, 143-173.

Lo, A., 1987, "Semiparametric Upper Bounds for Option Prices and Expected Payoffs," Journal of Financial Economics 19, 373-388.

Lo, A. and J. Wang, 1995, "Implementing Option Pricing Models when Asset Returns are Predictable," forthcoming in Journal of Finance.

Merton, R., 1976, "The Impact on Option Pricing of Specification Error in the Underlying Stock Price Distribution," Journal of Finance 31, 333-350.

Merton, R., 1976, "Option Pricing When Underlying Stock Returns are Discontinuous," Journal of Financial Economics 3, 125-144.

Merton, R., 1990, Continuous-Time Finance. Cambridge: Basil Blackwell. Chapter 3.

Rubinstein, M., 1985, "Nonparametric Tests of Alternative Option Pricing Models Using All Reported Trades and Quotes on the 30 Most Active CBOE Option Classes from August 23, 1976 Through August 31, 1978," Journal of Finance 40, 455-480.

Smith, C., 1976, "Option Pricing: A Review," Journal of Financial Economics 3, 3-54.

Whaley, R., 1982, "Valuation of American Call Options on Dividend-Paying Stocks: Empirical Tests," Journal of Financial Economics 10, 29-58.

Wiggins, J., 1987, "Option Values Under Stochastic Volatility: Theory and Empirical Estimates," Journal of Financial Economics 19, 351-372.

B. Futures and Forward Prices

Chan, K., K.C. Chan and G.A. Karolyi, 1991, "Intraday Volatility in the Stock Index and Stock Index Futures Markets," Review of Financial Studies 4, 657-684.

Hansen, L. and R. Hodrick, 1980, "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy 88, 829-853.

MacKinlay, A. and K. Ramaswamy, 1988, "Index Futures Arbitrage and the Behavior of Stock Index Futures Prices," Review of Financial Studies 1, 137-158.

Siegel, D. and D. Siegel, 1990, Futures Markets. Chicago: Probus Publishing.

Stoll, H. and R. Whaley, 1990, "The Dynamics of Stock Index and Stock Index Futures Returns," Journal of Financial and Quantitative Analysis 25,441-468.

XII. Non-Standard Approaches in Finance

A. Chaos and Nonlinear Dynamics in Stock Returns

Gleick, J., 1987, Chaos: Making a New Science. New York: Viking Penguin Inc.

Hsieh, D., 1991, "Chaos and Nonlinear Dynamics: Application to Financial Markets," Journal of Finance 46, 1839-1877.

Hutchinson, J., A. Lo and T. Poggio, 1994 "A Nonparametric Approach to Pricing and Hedging Derivative Securities via Learning Networks," Journal of Finance 49, 851-889.

Kahneman, D. and A. Tversky, 1982, "The Psychology of Preferences," Scientific American 246, 160-173.

Pearl, J., 1988, Probabilistic Reasoning in Intelligent Systems: Networks of Plausible Inference. San Mateo: Morgan Kaufman Publishers.

Penrose, R., 1989, The Emperor's New Mind: Concerning Computers, Minds, and the Laws of Physics. New York: Oxford University Press.

Tversky, A. and D. Kahneman, 1987, "Rational Choice and the Framing of Decisions," in Rational Choice: The Contrast Between Economics and Psychology, edited by R. Hogarth and M. Reder. Chicago: University of Chicago Press.

White, H., 1989, "Some Asymptotic Results for Learning in Single Hidden-Layer Feedforward Network Models," Journal of the American Statistical Association 84, 1003-1013.

B. Technical Trading Rules

Allen, F., and R. Karjalainen, 1994, "Using Genetic Algorithms to Find Technical Trading Rules," working paper, The Wharton School.

Brock, W., Scheinkman, J. and B. LeBaron, 1992, "Simple Technical Trading Rules and the Stochastic Properties of Stock Returns," Journal of Finance 47, 1731-1763.

LeBaron, B., 1991, "Technical Trading Rules and Regime Shifts in Foreign Exchange," working paper, University of Wisconsin at Madison.

Murphy, J., 1986, Technical Analysis of the Futures Market. New York: Prentice-Hall.

Supplementary Mathematics and Statistics References

Abramowitz, M. and I. Stegun, 1972, Handbook of Mathematical Functions with Formulas, Graphs, and Mathematical Tables, 10th printing. Washington: U.S. Government Printing Office.

Arnold, L., 1974, Stochastic Differential Equations: Theory and Applications. John Wiley.

Billingsley, P., 1968, Convergence of Probability Measures. New York: John Wiley.

Cormen, T., Leiserson, C. and R. Rivest, 1990, Introduction to Algorithms. Cambridge, MA: MIT Press.

Gradshtein, I. and I. Ryzhik, 1980, Table of Integrals, Series, and Products, 4th edition. New York: Academic Press.

James, F., 1990, "A Review of Pseudorandom Number Generators," Computational Physics Communications 60, 329-344.

Johnson, N. and S. Kotz, 1969, Continuous Univariate Distributions, Volumes 1-2. New York: John Wiley and Sons.

Johnson, N. and S. Kotz, 1972, Continuous Multivariate Distributions. New York: John Wiley and Sons.

Johnson, N. and S. Kotz, 1969, Discrete Distributions. New York: John Wiley and Sons.

Kendall, M. and A. Stuart, 1977, Advanced Theory of Statistics, Volumes I-III, Fourth Edition. New York: MacMillan Publishing Company.

Knuth, D., 1981, The Art of Computer Programming, Volume 2: Seminumerical Algorithms, Second Edition. Reading, MA: Addison-Wesley Publishing Company.

Lehmann, E., 1983, Theory of Point Estimation. New York: John Wiley and Sons.

Lehmann, E., 1986, Testing Statistical Hypotheses, Second Edition. New York: John Wiley and Sons.

Press, W., Flannery, B., Teukolsky, S. and W. Vetterling, 1986, Numerical Recipes: The Art of Scientific Computing. Cambridge, UK: Cambridge University Press.

Wolfram, S., 1990, Mathematica: A System for Doing Mathematics by Computer. Redwood City, CA: Addison- Wesley Publishing Company, Advanced Book Program.