One of the most important corollaries of the efficient markets hypothesis for corporate management is the futility of using accounting manipulations to increase stock prices. Academic research in finance and accounting has produced a large body of evidence attesting to the ability of the stock market to penetrate accounting fictions. When bonds are first issues the agencies in effect certify the issue providing investors with an implicit guarantee that the bonds ...
Randon inflation has a similar disconcerting effect on our financial markets. Each year for instance we know that inflation will produce a tax increase but we don't know how large in will be where unexpected inflation proves especially disruptive, however is in its effects on traditional financial contracts between borrowers and lenders just as blueprints cannot be based on an unstable and unpredictable measure of distance, finance contracts cannot be based on an ...
The purpose of this article is to review recent thinking an the question, how to immunize. Although it will largely pass over the prior issue of why and when to immunize. It is worth emphasising at the outset that merely because a firm has the opportunity to hedge a particular risk. It is not necessary in the interest of the firm's share holder to do so. It should also be pointed out that even if a company decides not to immunize, the concept of duration is ...