## Theory of Financial Markets |

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### Contents

The Demand for Securities | 36 |

Security Market Equilibrium | 64 |

Extensions of the Valuation Model | 86 |

Copyright | |

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### Common terms and phrases

allocation amount analysis assume behavior bonds cent Chapter clearly company value company's consider cost of capital debt level decision decision problems derived determined distribution for return dividend payment dividend policy economic effect efficient portfolios equal equations equilibrium estimates expected return expected utility theorem final wealth firm firm's given hence hold implies increase indifference curve initial wealth interest rate investment criterion investors linear marginal utility market clearing conditions market valuation formula maximize means mutual funds number of shares obtain optimal outcome Pareto-optimal person portfolio selection positive possible price per share probability distribution problem production function proportionality assumption quadratic utility function random variable rate of return represents result returns to scale risk aversion function risk measure riskless asset risky asset security markets share prices sharing rules situation solution specification speed skating standard deviation stochastic theoretical theory tion uncertainty variance wealth effect zero