LYON taming

Article Abstract:

Zero coupon bonds that are convertible, callable and puttable are known as liquid yield option notes, or LYONs. Research on the values of such securities and the methods behind LYON valuation is presented. The research develops a simple contingent claims pricing model applicable to LYONs and illustrates such application with a specific LYON issuance. In the discussion by Scott P. Mason following the research paper, it is noted that the pricing model developed overlooks the importance of interest rate uncertainty when pricing these securities; however, this is admittedly a minor point, more than offset by the impracticality of introducing interest rate volatility into the model.

Conferences, meetings and seminars, Valuation, Zero coupon securities, American Finance Association

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An unbiased reexamination of stock market volatility

Article Abstract:

New tests of the volatility of stocks' values, prices and rates of return support the research originally performed by Robert J. Shiller, Stephen F. LeRoy and Richard D. Porter, in that the new tests show that stock price fluctuations cannot be related to changes in expected dividends. The tests developed are applied to stock market data for the period from 1872 to 1983, the same time period employed by Shiller in his original research. In a discussion of the new tests of stock market volatility developed, Robert Shiller reviews his own research findings and compares them to the findings provided by these new tests.

United States, Criticism and interpretation, Shiller, Robert J.

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Debt-equity ratio and expected common stock returns: empirical evidence

Article Abstract:

The expected common stock returns are positively related to the ratio of debt (non-common equity liabilities) to equity, controlling for the beta and firm size and including as well as excluding January, though the relation is much larger in January. This relationship is not sensitive to variations in the market proxy, estimation technique, etc. The evidence suggests that the "premium" associated with the debt-equity ratio is not likely to be just some kind of "risk premium". (Reprinted by permission of the publisher.)

Debt equity conversion

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