The present paper gives two methods of discriminating between the two particular cases given by (1) and (2).2 Two illustrations from an economic context will suffice to show the im- portance of the choice between (I) or (2). (a) Much attention has been devoted to the problem of predicting aggregate consumption on the basis of aggregate income on a time series basis. Investi- gators may face the choice between a model relating consumption in money terms to money income and the price level and a model relating real consump- tion (money consumption divided by the price level) to real income. (b) Recently a great deal of interest has centered on analyzing the portfolio behavior of various economic units. In particular, portfolios have been de- composed into broad assets categories and the changes in asset composition