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Used for listed equity securities. Go to the floor and check with the specialist or floor broker that my
previously active order has been cancelled and was not executed. One does not have to honor any trade
reported after given a firm out.
Conflict between bondholders and stockholders
These two groups may have interests in a corporation that conflict. Sources of conflict include dividends,
distortion of investment, and underinvestment. Protective covenants work to resolve these conflicts.
Conglomerate
A firm engaged in two or more unrelated businesses.
Conglomerate merger
A merger involving two or more firms that are in unrelated businesses.
Consensus forecast
The mean of all financial analysts forecasts for a company.
Consol
A government bond with no maturity . Popular in Great Britain. The formula for valuing these bonds is
simple. The consol payment divided by yield to maturity is the price of the bond.
Consolidation
The combining of two or more firms to form an entirely new entity.
Consortium banks
A merchant banking subsidiary set up by several banks that may or may not be of the same nationality.
Consortium banks are common in the Euromarket and are active in loan syndication.
Constant-growth model
Also called the Gordon-Shapiro model, an application of the dividend discount model which assumes (1) a
fixed growth rate for future dividends and (2) a single discount rate.
Consumer credit
Credit granted by a firm to consumers for the purchase of goods or services. Also called retail credit.
Consumer Price Index
The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace
of U.S. inflation. The U.S.Department of Labor publishes the CPI very month.
Contagion
Excess correlation of equity or bond returns. For example, under usual conditions we might observe a
certain level of correlation of market returns. A period of contagion would be associated with much higher
than expected correlation. Some examples might be the conjectured contagion in East Asian markets
beginning in July 1997 when the Thai currency devalued or the impact across many emerging markets to
the Russian default. Contagion is difficult to identify because you need some sort of measure of the
expected correlation. It is complicated because correlations are known to change through time, for example,
see Erb, Harvey and Viskantas article in the 1994 Financial Analysts Journal. In periods of negative returns,
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