Every company evaluating an investment project or an acquisition in an emerging market must not only estimate future cash flows but also an appropriate discount rate. Although not free from controversy, the cost of equity in developed markets is typically estimated with the CAPM. In emerging...

The assumption that daily stock returns are normally distributed has long been disputed by the data. In this article we test (and clearly reject) the normality assumption using time seriesof daily stock returns for thirteen European securities markets. More importantly, we fit to the data four...

The assumption that stock prices follow a random walk has critical implications for investors and firms. Among those implications is the fact that data frequencies and investment horizons are irrelevant (as defined below) when evaluating the risk of a security. However, if stock prices do not...

The standard deviation, arguably the most widely-used measure of risk, suffers from at least two limitations. First, the number itself offers little insight; after all, what is the intuition behind the square root of the average quadratic deviation from the arithmetic mean return? Second,...

I analyze in this article the impact of insider trading regulation (ITR) on a securities market and on social welfare, and argue the imposition of ITR forces a reallocation of wealth and risk that decreases social welfare. Three reasons explain this result: First, ITR increases the volatility of...

We evaluate in this article the impact of the regulations on insider trading introduced between 1988 and 1994 on ten European securities markets. We consider the temporal behavior and the distributions of abnormal returns, market models, and time series models of time-varying mean returns and...

I analyze in this paper the impact of insider trading regulation (ITR) on a securities market and on social welfare. I argue below that the imposition of ITR forces a reallocation of wealth and risk that decreases social welfare. Three reasons explain this result. First, ITR increases the...

Although investors associate risk with negative outcomes and downside fluctuations, modern portfolio theory does not. For investors, volatility per se is not necessarily bad; volatility below a benchmark is. A stock that magnifies the market's fluctuations is not necessarily bad; one that magnifies...