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Preferred habitat theory |
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Preferred habitat theoryA biased expectations theory that believes the term structure reflects the expectation of the future path of interest rates as well as risk premium. The theory rejects the assertion that the risk premium must rise uniformly with maturity, but instead profits that to the extent that the demand for and supply of funds do not match for a given maturity range, some participants will shift to maturities showing the opposite imbalances, as long as they are compensated by an appropriate risk premium whose magnitude will reflect the extent of aversion to either price or reinvestment risk.Preferred habitat theory Similar MatchesAuction rate preferred stock (ARPS)Auction rate preferred stock (ARPS)Floating-rate preferred stock, whose dividend is adjusted every seven weeks through a Dutch auction. Preferred stockPreferred stockA security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most preferred stock pays a fixed dividend that is paid prior to the common stock dividend, stated in a dollar amount or as a percentage of par value. This stock does not usually carry voting rights. Preferred stock has characteristics of both common stock and debt. Convertible preferred stockConvertible preferred stockPreferred stock that can be converted into common stock at the option of the holder. See also: participating convertible preferred stock. Preferred dividend coveragePreferred dividend coverageNet income after interest and taxes (before common stock dividends) divided by preferred stock dividends. Depository preferredDepository preferredDevice enabling an issuer to circumvent an arbitrary corporate limit on the number of preferred shares issuable. Applies mainly to convertible securities. Further SuggestionsFloating rate preferredMonthly income preferred security (MIP) First preferred stock Preferred equity redemption stock (PERC) Cumulative preferred stock Preferred stock agreement Blank Check Preferred Stock participating preferred stock Preferred stock ratio preferred stock Prior preferred stock Participating preferred stock Dutch Auction Preferred Stock adjustable rate preferred stock Auction Market Preferred Stock (AMPS) Adjustable rate preferred stock (ARPS) Second preferred stock cumulative preferred stock |
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