Stanley Siegel
Spring Term 1996
Department of Legal Studies, Budapest


The object of this course is to study the legal and economic theory of the operation of capital markets, and to evaluate their actual operation in free - market economies. We will study the "how" and "why" of stock and bond trading; evaluate the role of options, futures, indexes and commodity contracts; and discuss the legal structures necessary to assure openness and honesty in capital markets.

The first part of the course will be a detailed examination of contemporary corporate finance, including the following topics:

(1) Valuation of investments by the method of discounted net present value of projected cash flow.

(2) Contemporary market theories, including the Capital Asset Pricing Model, Arbitrage Pricing Theories and Chaos Theories.

(3) The Efficient Market Hypothesis, in theory and practice, and its effect on legal regulation.

(4) Options and other derivative investments.

The second part of the course will be an introduction to the regulation of securities and securities markets in the United States and the European Community. The topics will include:

(1) The operation of auction securities exchange (such as the New York Stock Exchange - NYSE) and distribution securities networks (such as the National Association of Securities Dealers Automatic Quotation System - NASDAQ)

(2) The process of underwriting and distributing stocks, bonds and other securities.

(3) The character and extent of necessary regulation: disclosure - based regulation, "merit" regulation, anti - fraud rules, and limits on the access to securities markets.

(4) Prospectus requirements for the issuance of securities.

(5) Periodic disclosure requirements.

(6) Anti - Fraud rules, insider - trading prohibitions, and the role of civil liability and criminal penalties.

(7) Tender offers and take - overs.

Digitized version prepared by the Curriculum Resource Center (CRC)
CEU Budapest, Hungary
Revised: April 1996


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