First, the ratio per se is very intuitive hosting the idea that the stronger the response of returns, the less liquid is the stock. Second, this illiquidity ratio is consistent with other theoretical concepts (Kyle (1985), Pastor & Stambaugh (2003)). It is aslo shown in Cochrane (2005a) that the ratio may have a “price discovery” component when the trading is motivated by information that changes expectations about future share price movements. Third, Amihud’s illiquidity measure is reciprocal to the Aminvest ratio that is widely used by professionals. Nevertheless, Florackis et al.
The Multiples approach is usually only used to get a rough estimate how much a company could be worth. The only advantage of this method is its simplicity. Disadvantages would be that it doesn’t consider the future performance of a company and that it’s subjective because truly comparable companies rarely
Like Coase indicates, if market transactions were cost-free, all that would be substantive are the rights of the parties. If these are delimited properly, the result of the bargaining would be simple to predict. And here resides the difference between Coase’s point of view and the one Pigou defends . Market transactions are not free. In fact they are quite costly, so the parties involved will take into account how much they value the activity they are doing, from an efficiency economic view.
This stands in sharp contrast to the early view of Miller and Modigliani (1958), who argued that in a well-functioning efficient market without taxes, informational asymmetries, and default costs no financial synergy can be found because the market value of company does not depend on its capital structure. However, a firm’s capital structure decision can matter if these assumptions are not true. The theory has two important caveats concerning its applicability; first, one of the merging firms must be experiencing financial distress. The theory is most directly applicable to marginally profitable start-up companies and existing companies that are financially distressed. Second, theory only applies when severe agency problems exist between the manager and the claim holders of the distressed firm.
The tax holidays are open-ended in that their value depends upon the amount of profit earned. The types of highly-profit activities that benefit most are the least need of the incentive and would have occurred in the absence of the incentive. The bulk of the revenue forgone is likely to have had no beneficial impact on investment. The experience of Asian countries with tax holidays directed toward export-oriented industries is also instructive. Low-cost assembly plants that are highly mobile can be the most affected by holidays.
Starting from the late 1970’s, empirical examinations of the traditional CAPM indicate the possible existence of anomalous excessive returns related to size, book-to-market, earnings yield and leverage variables among others. Ball (1978) suggest that the Earnings Price (E/P) ratio, an accounting variable obtained by dividing the earnings of a firm with its stock price, may be a direct proxy for expected returns. He states that the abnormal returns on stocks following earnings announcements are not explained by the CAPM. In light of the deficiencies associated with the CAPM, especially the use of a questionable market portfolio proxy as per Roll (1977), the E/P is an important factor in explaining expected returns (Ball, 1978). However Reinganum
There are specific vendors who are greatly interested in lending loans at a greater risk. However, these are done through specialist loan providers. An important consideration proposed on bad credit debt consolidation loan is the higher APR. It is important to check whether the APR is appropriate. The bad credit is used an advantage to reap more profits by offering loan to such customers.
As this model was developed throughout the years by Friend, Westerfield and Dittmar they aimed to prove that skewness and kurtosis were significant in explaining the variable asset returns. They proceeded to examine that the systematic skewness (co-skewness) is capable of explaining the behaviour of asset returns which was before not fully explained by the traditional CAPM. The higher moment models therefore continues to suggest that many investors prefer ‘odd’ moments and are willing to pay a substantially higher price for them and that investors dislike even or safe moments and usually expect to be compensated for them. (O’Brien 2016) This higher moment model demonstrates to us that investors are usually of a more risk-taking nature compared to the traditional CAPM model. Studies have shown their results suggest that the input variables, such as market return, book-to-market ratio, co-skewness, and co-kurtosis have had a significant influence on share returns.
The main part that convertible bond is lacking is in term of “detach” where this bond cannot be detach like the bond-warrant. Due to this, the convertible bond cannot the valued separately according to the perspective of accounting. Based on the benefits shows by bond-warrant that exceed the potential of convertible bond, the normative analysis assume that this bond will be popular among investor and will be frequently choose and issued by firms even though the number of investor and firms who choose the convertible bond still high. In other word, the normative analysis believes that the bond-warrant will be a huge hit and preferred by investor and firms and beat the numbers of convertible
REITs are listed in secondary market and due to this reasons it was easily to convert to the cash. The secondary market in South Korea is KOSPI index that represent the stock market index. This will give the convenience to the unit holder to tread between buyer and seller. Next, the advantages of REITs are affordability. The REITs is affordable for all the type of investor whether individual or companies.