Article Abstract:
Regression analysis is used to examine the effect of stock price response growth opportunities to new corporate financing through security offerings. The decline in stock prices forequity offerings of mature companies is noted to surpass the corresponding decline for growth firms. Mature firms displayed a distinct decline in stock price for offerings of straight and convertible debt. Growth firms, on the other hand, showed no marked changes in stock price. The stock price response to new financing is attributed, to a large extent, to a number of growth opportunity measures. A differentiation of firms with no dividend pre-financingpayments, firms with suspended dividends and firms with high dividends is made based on their characteristics as mature or growth firms.
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Article Abstract:
An estimation method for calculating the volatility parameter used in security price models is proposed. The new method is considered to be more efficient than the estimation method proposed by Parkinson in 1980. The new method assumes that the Brownian motion process that security prices follow may have nonzero drift terms. The new method produces an estimator that has an efficiency of around 10 in comparison to the standard sample variance estimator, whereas the estimator by Parkinson has an efficiency of around 4.91 in comparison to the standard estimator.
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Article Abstract:
The continuous time model of security pricing is examined, as are its underlying assumptions relevant to the absence of friction within markets, trading opportunities and other stochastic processes on securities markets. Equilibrium on such markets, defined by the continuous time attributes of ongoing trading opportunity and frictionlessness, is analyzed and the stochastic processes most likely to be present (given the model) are identified. The research verifies the assumption that continuous price processes have infinite variety on frictionless markets.
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