Dutch Auction Rate Preferred Stock (DARPS) was created in the 1980s as a way for fully taxable corporate investors and tax-exempt issuers to share the tax benefits of the dividends received deduction. DARPS dividend yields were reset every few weeks through an auction, minimizing price risk and...

As institutional investors have become more aggressive in deploying their capital, fund managers have become more creative with their product offerings. In this paper, we consider a new institutional fund of mutual funds, a portfolio that combines the best-idea stocks from two underlying primary...

In February of 2008, the $330 billion auction-rate security market began to fall apart. Brokerage houses that managed the periodic auctions refused to support their issues, so that auctions failed and liquidity disappeared. Investors had a wake-up call: an asset they had thought was a...

Many consumer advocates consider payday loans—short-term, uncollateralized loans with high interest rates—to be predatory. The demand for short-term funding has spurred the quest for a substitute, an effort encouraged and supported by regulators like the Federal Deposit Insurance...

Determining the cost of equity is one of the most difficult problems in corporate finance. In this paper, we present a simple estimation example using an internet start-up company. We use public firm comparables for beta, making adjustments for leverage using Harris and Pringle’s (1985)...

The constant growth stock pricing model is an important component of introductory corporate finance courses, and an important step on the way to understanding the general two-stage model. In this paper, I present a relatively fun puzzle based on the relationships implied by the constant growth...

Finance students can experience real-world challenges and enhance their learning by running an investment fund. However, most of the student-managed funds that currently exist are relatively large, equity-focused portfolios; few funds concentrate on debt, since fixed-income investing usually...

Introductory investments courses revolve around Harry Markowitz’s modern portfolio theory and William Sharpe’s Capital Asset Pricing Model. Nonetheless, the textbook versions of these seminal contributions tend to obscure their economic insights, focusing instead on their...

Intraportfolio correlation (IPC), a measure of portfolio diversification, is becoming increasingly popular among investment practitioners. However, despite the assertions of these adherents, IPC is far from a free lunch. Instead, it is a simplistic and flawed measure that ignores material...

In this paper, we present a model in which higher-valued managers signal their value by voluntarily submitting to shareholder oversight. If a manager is willing to sell enough stock to release voting control, he is perceived to be of higher quality than if he had defensively maintained control....