Security baskets and index-linked securities

Article Abstract:

The implications of the creation of security baskets and index-linked securities on investor profits and decisions and on the market for individual securities are examined. Such composite securities are asset bundles whose returns depend on the composite cash flows of the underlying pool of assets. They provide an alternative to trading a portfolio of the individual underlying assets and thus improve the welfare of uninfromed traders by reducing their trading losses. This occurs because variances in security baskets' rate of return are lower, implying less asymmetric information. Given heterogeneous risks, markets for several composite securities may exist simultaneously. Markets for a single composite and its underlying components may also coexist given a high level of heterogeneity.

Financial markets

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Shelf registration and the market for seasoned equity offerings

Article Abstract:

US Securities and Exchange Commission (SEC) Rule 415 allows g firms to register all securities that they anticipate selling within two years without filing additional registration statements with the SEC, thereby saving the firms the costs of registration. Corporate use of Rule 415 has been limited because the procedure offers insufficient underwriter certification resulting in greater release-day securities price declines than if the stocks were not registered under Rule 415. Only larger, well-known corporations with large institutional shareholdings and security in the value of their firms tend to use Rule 415.

Regulation misc. commercial sectors, Laws, regulations and rules, United States. Securities and Exchange Commission

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The agency costs of free cash flow: acquisition activity and equity issues

Article Abstract:

Stockholders anticipate the misuse of funds generated for management use by equity issues, but condition their response to equity issue announcements on the basis of management's reputation for misusing free cash flow. Stockholder reaction at equity issue announcements is more favorable for those forms with records of acquiring assets that are related only to their core business than for all other companies. Stockholders' concerns about misuse of funds are somewhat lessened by the bonding of cash flows through debt issues.

Methods, Economic aspects, Finance, Acquisitions and mergers, Management, Corporate finance, Cash flow

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