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IAER: MAY 1998, VOL. 4, NO. 2

Market Portfolio Selection When Using the Capital Asset Pricing Model
CORNELIUS A. HOFMAN

GEC, Inc.--U.S.A.

The capital asset pricing model (CAPM) attempts to capture investment risk by quantifying price
volatility. The CAPM equation is commonly written:

R : rf+ ~,(Rm-r:)

where: R~ is the return on security i; r: is a risk-free rate; ~ is the beta on security i (i.e., the degree
to which changes in the price of security i correlate with overall market movements); a n d R m is the
return on the market portfolio.
The correct market portfolio according to the CAPM theory is the portfolio of all assets. In
practice, however, portfolios of traded assets are used. The choice of a market portfolio dictates the
value o f R m and determines the value for D~. If the market used to calculate R m and if [3~can be chosen
independently, there is no longer a theoretical base for the model.
The relationship between Rm and ~i becomes clear if the following changes are made to the
standard CAPM equation:

R, : r: + ~i,p(~m,p- rf) ,
where: R i is the return on security i; r/is a risk-free rate; ~i,p is the beta on security i measured in
relation to portfolio p; and Rm,e is the return on portfolio p.

The Effeet of Managed Care on Hospital Marketing Orientation

PATRICIA LOUBEAU AND ROBERT JANTZEN

lona College--U.S.A.

Based on a national survey of 235 acute care, short-term, voluntary hospitals in the U.S., this
study found that, while hospitals are more marketing-oriented today than in the past, managed care
insurers are inducing hospitals to decrease their marketing efforts. Despite the suggestions of many
analysts that the return to marketing will increase as the hospital environment becomes increasingly
competitive, the evidence indicates that the need to contain costs has overwhelmed any perceived
benefits to marketing for those hospitals heavily dependent on managed care insurers. The study also
found that hospital size and network status also distinguished marketing efforts at differing hospitals.
Larger hospitals and participants in integrated delivery system networks were more marketingoriented than their smaller and nonparticipant counterparts, respectively. Lastly, neither region nor
profit status significantly influenced a hospital's investment in marketing.

Ethical Implications of Take-Home Tests and Free-Riding Behavior

EMMANUEL O. ONIFADE, FABIAN K. NABANGI, RUTHIE O. REYNOLDS, AND RODGER R. TRIGG

Morehouse College, Morehouse College, Morehouse College, and Columbus State University---U.S.A.

The purpose of this paper is to examine whether low-performing (GPA < 3.0) and highperforming (GPA = 3.0-4.0) students can identify free-riding behavior as being unethical (not the
right thing to do), whether they will do the right thing while performing take-home tests, and the
effect of their free-riding behavior on the pedagogical benefit of take-home tests. Free-riding
behavior occurs when a student asks someone else to do a take-home test for him or provide
assistance to him while performing take-home tests. A student who free-rides while performing takehome tests can mislead a professor to accrue an undue reward to him. Therefore, free-riding is not
the right thing to do. Kohlberg [1976] describes an ethical behavior as the right thing to do.