Essays on the selection of securities : decision on acquisition and issuance perspectives and decision rules

Document Type



Doctor of Philosophy (PhD)


Business Administration

First Advisor's Name

Aiun J Prakash

First Advisor's Committee Title

Committee Chair

Second Advisor's Name

Gauri L. Ghai

Third Advisor's Name

Chun-Hao Chang

Fourth Advisor's Name

Ali M. Parhizgari

Fifth Advisor's Name

Krishnan Dandapani

Date of Defense



This dissertation is a discourse on the capital market and its interactive framework of acquisition and issuance of financial assets that drive the economy from both sides investors/lenders and issuers/users of capital assets. My work consists of four essays in financial economics that offer a spectrum of revisions to this significant area of study. The first essay is a delineation of the capital market over the past half a century and major developments on capital markets on issues that pertain to the investor's opportunity set and the corporation's capital-raising availability set. This chapter should have merits on two counts: (i) a comprehensive account of capital markets and return-generating assets and (ii) a backdrop against which I present my findings in Chapters 2 through 4.

In Chapter 2, I rework on the Markowitz-Roy-Tobin structure of the efficient frontier and of the Separation Theorem. Starting off with a 2-asset portfolio and extending the paradigm to an n-asset portfolio, I bring out the optimal choice of assets for an investor under constrained utility maximization. In this chapter, I analyze the selection and revision-theoretic construct and bring out optimum choices. The effect of a change in perceived risk or return in the mind of an investor is ascertained on the portfolio composition.

Chapter 3 takes a look into corporations that issue market securities. The question of how a corporation decides what kinds of securities it should issue in the marketplace to raise funds brings out the classic value invariance proposition of Modigliani and Miller and fills the gap that existed in the literature for almost half a century. I question the general validity in the classic results of Modigliani and Miller and modify the existing literature on the celebrated value invariance proposition.

Chapter 4 takes the Modigliani-Miller regime to its correct prescription in the presence of corporate and personal taxes. I show that Modigliani-Miller's age-old proposition needs corrections and extensions, which I derive.

My dissertation overall brings all of these corrections and extensions to the existing literature as my findings, showing that capital markets are in an ever-changing state of necessary revision.



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