Purpose – The cornerstone of Modern Portfolio Theory with implications for many aspects of corporate finance is that reduced correlation among assets and reduced standard deviation are key elements in portfolio risk reduction. The purpose of this paper is to analyze the conditional correlation...

Purpose – The traditional discounted cash flows (DCF) valuation procedure used by financial analysts assumes that firms maintain a policy of fixed debt. However, empirical evidence suggests that many firms rebalance their debt. This paper seeks to explore the implication of this discrepancy...