After the betas are controlled for, idiosyncratic variance and firm size have no effect. The few existing studies on equity price dynamics and market efficiency for Latin American emerging equity markets show conflicting results. In sum, therefore, the evidence suggests that international investors in these markets cannot use historical information to design systematically profitable trading schemes because future long-term returns are not dependent on past returns. Therefore, any announcement effects must be attributed to other factors such as the optimal trading range hypothesis. The security is dividend enhanced and converted into common stock within four years.
Issuers have high debt ratios, low interest coverage, and bankruptcy risk.
Market response to the issue was neutral suggesting the preferred issue resolved the lemon problem associated with common stock. Firms' Z-scores and abnormal returns are inversely related indicating the issues reduced financial distress. Market response was most positive for low risk firms with high cash flows. Between 1954 and 1991, U.S. stocks, long-term government bonds, and corporate bonds show negative risk premiums during periods preceded by inverted yield curves. Intermediate-term government bonds do not.