Recently, there has been an increased interest in the role that bankruptcy or ruin plays in the valuation process. Several authors have discussed this subject (Gordon [17], Quirk [27], and Smith [35]) and some have constructed theoretical models attempting to show how the probability or risk of ruin introduces an element of risk into valuation (for example, Bierman [5], Borch [8], Tinsely [37]). The question of corporate survival is, therefore, central to the financial considerations of the firm. None, however, has attempted empirical tests of the role of such a probability in valuation.

This paper develops an exact theoretical test of the presence or absence of a filter effect for a portfolio of securities and a general number of different filter sizes. It is a natural development from Praetz [8], which obtained exact expressions for the mean and variance of rates of return of the investment strategies under filter tests assuming the underlying stochastic process is a random walk. These expressions showed that expected returns from filter strategies are, in fact, less than the return from a buy-andhold alternative with which filter returns are usually compared.

Of the many conglomerate studies to date, some have dealt with the risk-return performance of conglomerates in the context of the capital asset pricing model [2, 7, 10, 14], others have considered the motives for the formation of conglomerates [4, 5, 6, 13], and still others have examined the operating characteristics of conglomerates [9, 12, 15]. Within the last group, Weston and Mansinghka [15, p. 928] argued that the primary motivation for conglomerate formation is defensive diversification, “…defined as diversification to avoid adverse effects on profitability from developments taking place in the firm's traditional product market areas.” Another motivation is provided by Levy and Sarnat [4] and Lewellen [5] who demonstrated that the only economic gain from a purely conglomerate merger may be the increased debt capacity resulting from the combination of entities having imperfectly correlated earnings streams.

Trading in currencies in order to obtain the best possible exchange rate is known as arbitrage and can broadly be divided into three categories:1) Space Arbitrage––transactions to take advantage of discrepancies between rates quoted at the same time in different markets.2) Time Arbitrage––transactions to take advantage of discrepancies between forward margins for different maturities.3) Interest Arbitrage––transactions to take advantage of discrepancies between yield on short-term investments in different currencies. This form of arbitrage can be split into (a) Covered and (b) Uncovered (speculative) interest arbitrage. The former variety uses today's forward rate for forward conversion back into our holding currency; the latter allows the dealer to use the spot rate existing in the future.

Roy L. Crum, Darwin D. Klingman, Lee A. Tavis, Implementation of Large-Scale Financial Planning Models: Solution Efficient Transformations, The Journal of Financial and Quantitative Analysis, Vol. 14, No. 1 (Mar., 1979), pp. 137-152

It Is commonplace within the confines of finance literature to explain variations in the firm's residual income stream via the dichotomy of business risk and financial risk. On an ex-post basis the business risk of the enterprise is a direct result of the firm's investment decision and is, thereby, embodied in its asset structure. It follows that the company's cost structure, product demand characteristics, intra-industry competitive position, and managerial talent all affect its business risk posture.