A theoretical and empirical investigation of prime and score: An application of two-state option pricing model

Primes and scores are the unbundled stock units which are created by Americus Trusts in 1983. These primes and scores enable shareholders to separate the potential capital appreciation above a stipulated dollar amount from the rights to receive dividends and all other attributes of share ownership. Value additivity theorem suggests that the sum of prime prices and score prices is equal to the stock prices or is less than the stock prices, if any management fee. Primes and scores show the premiums over stock prices consistantly over time, which is inconsistent with the predictions of value additivity theorem. Transaction cost saving hypothesis cannot explain the behaviors of premiums in primes and scores. As an alternative explanation, market incompleteness hypothesis is derived and tested. The empirical results support the market incompleteness hypothesis.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Finance

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2011

Author dc:creator

• Cheong, M.K.

Contributors dc:contributor

• Park, Hun Y.

• Economics, Finance

Statement dc:rights

• Copyright 1990 Cheong, Mun Kyung

Language dc:language

eng

Identifier

AAI9114199
(UMI)AAI9114199

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/19416