Banking standards under the federal reserve system

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Monograph

Identifikator:: 1762969653

URN:: urn:nbn:de:zbw-retromon-142432

Document type:: Monograph

Title:: Banking standards under the federal reserve system

Place of publication:: Chicago

Publisher:: A. W. Shaw Company

Year of publication:: 1928

Scope:: xxxviii, 420 Seiten

Digitisation:: 2021

Collection:: Economics Books

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376 BANKING STANDARDS and (2) the most probable effect of a change of, say, 1, (0.1 of a point) in total expense from one year to the next is to change net earnings 0.497, (0.0497 of a point)—neglecting the constant— in the opposite direction. If total expense were the only thing determining net earnings, and if a straight-line equation like (1) represented the law of variation perfectly, the residuals, v, would all be zero. The smaller the residuals and the more closely their frequency dis- tribution approaches the normal law of error, the closer the agree- ment between theory and fact. While it was not expected that the residuals in (1), applied to all 408 banks, would be zero, first, because gross earnings is neglected, and second, because of a possible variation from a linear relationship, it might be expected, in the absence of knowl- edge to the contrary, that the character of the distribution of the residuals in Solution 7, would be the same for each of the groups of the 408 banks. That is, the most natural supposition would be that the law of variation of net earnings, in so far as it depends upon total expense alone, is the same for the banks in each of the groups in Table I. In order to determine whether the influence of total expense on net earnings is the same, regardless of the group-location of the banks, the residuals of Solution I, were studied in groups, as shown in Table II. TasrLE II RESIDUALS OF SOLUTION [, Group! mT. - Son NUMBE® ~® WAL NUMBER OF BANks Fy2 ‘Te 73 MEAN 9 Proz- ABLE Error +7.0 *5.7 *=10.3 *=6.3 *See Table I of Appendix 1. This table contains very strong evidence—if not proof—that the law of variation of net earnings, in terms of total expense, is not the same for banks in the different groups, and, if it is assumed for the moment—a fact which will be demonstrated later—that

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