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investment vehicles (PIVs) that dominate the market today: open-end mutual funds (MFs), closed-end mutual funds (CEFs), exchange-traded funds (ETFs), and unit investment trusts (UITs). It also discusses the overall structure and related benefits, drawbacks, and risks of each structure. Additional discussion focuses on the creation and redemption process, net asset value (NAV), premium/discount, tradability, liquidity attributes, tax efficiency, and leverage, as well as indirect and direct costs. The chapter also provides a brief history and general trends involving PIVs and the need to follow a disciplined investment process when evaluating these types of investments.

      Part Four: Special Equity Topics

      Part Four of the book contains four chapters (Chapters 21–24) that examine special equity topics. These issues include investing in private equity, investing in emerging markets, disclosure regulations in emerging economies, and equity crowdfunding investments.

      Chapter 21 Investing in Private Equity (Gaurav Gupta, Tianqi Jiang, and Zhao Wang) Private equity (PE) is an alternative asset class in which a direct investment exists in the equity of a private or a public company. Equities and bonds are traditionally traded in the secondary markets, whereas private equity is a private dealing between an investor or PE fund manager and the issuer company. The term private in PE signifies that the deal occurs in private rather than in public. The risk–reward profile of PE investments tends to be higher than for some other asset classes, resulting in potentially higher rewards. This chapter provides an overview of PE investments dealing with venture capital (VC) and buyouts as well as private investment in public entity (PIPE). It also discusses the long-term investment horizon, illiquidity, capital commitment, capital commitment period, capital call, portfolio diversification, performance, and risk factors involving PE investments.

Chapter 22 Investing in Emerging Markets (Xiaohau Diao, Shantanu Dutta, and Peng Cheng Zhu) Emerging markets offer expanded investment opportunities for global investors. Although emerging market returns are becoming more correlated with developed market returns, reducing the attractiveness of the diversification rationale, emerging markets are still distinct enough to appeal to global investors. Emerging markets offer higher return potential. However, to realize better returns and manage associated risks, investors need to have coordinated investment strategies. They also need to understand various factors associated with capital flows to emerging markets, market characteristics, political dynamics, and valuation challenges. Further, investors should pay close attention to legal protection, asset valuation techniques, corporate governance, and the regulatory environment that may substantially affect investment returns. The goal of this chapter is to examine issues related to capital market integration in an emerging market setup and to discuss various institutional strategies for making better investment decisions.

      Chapter 23 Disclosure Regulations in Emerging Economies and Their Impact on Equity Markets (Xiaohau Diao, Shantanu Dutta, and Peng Cheng Zhu) Corporate disclosure and financial reporting convey valuable information to shareholders and market participants. Although financial reporting is routinely done, mostly in a regular interval, according to regulatory requirements, corporate disclosures could be voluntary or mandatory depending on the nature of the information. This chapter focuses on emerging markets corporate disclosure-related regulations such as environmental and corporate social responsibility (CSR) disclosure, private meeting disclosure, and insider trading-related disclosure that attract interest among regulators, practitioners, and academics. The empirical evidence shows that implementing these regulations is not particularly effective. In many instances, authorities fail to identify or take adequate actions against violators. However, the regulatory bodies appear to have become more careful in recent years, which is likely to enhance the effectiveness of these disclosure regulations.

      Chapter 24 Equity Crowdfunding Investments (Dianna Preece) This chapter examines equity crowdfunding, which was an innovation introduced in the Jumpstart Our Business Startups (JOBS) Act of 2012 that many expected to be a boon for startups. Signed into law with bipartisan support, the JOBS Act intended to enable Americans to invest in new companies and their founders. However, the Securities and Exchange Commission (SEC) took years to create regulations to govern equity crowdfunding. After being launched in May 2016, equity crowdfunding has grown more slowly than expected. Early-stage investments are risky, and many nonaccredited investors may lack the sophistication to assess risks. JOBS 3.0 is expected to fix any existing problems but has yet to pass the U.S. Senate. Despite these roadblocks, equity crowdfunding is on the rise in both the United States and abroad, though investors are, so far, less plentiful than expected. Research on U.S. equity crowdfunding risks and returns is scant.

SUMMARY AND CONCLUSIONS

Equity securities are an important component in the portfolios of both individual and institutional investors. Including an equity component has several benefits, including portfolio diversification and potentially higher long-term returns in terms of capital gains and dividends. However, owning equity securities involves risk, given the volatility of these markets. To achieve their portfolio objectives, investors need to know how to analyze and value equity securities if they are selecting stocks themselves or how to select an appropriate pooled investment vehicle with professional managers. Equity Markets, Valuation, and Analysis provides the foundation for making sound investment decisions in equities. Contributions by both scholars and practitioners provide an in-depth survey of the role of equity securities, including the background of equity securities, an understanding of issues related to valuation and analysis, and various equity investment models and strategies, as well as special topics involving equity investments.

REFERENCES

      1 Visual Capitalist. 2016. “All the World's Stock Exchanges by Size.” Available at http://www.visualcapitalist.com/all-of-the-worlds-stock-exchanges-by-size/.

      2 World Bank. 2018. “Market Capitalization of Listed Domestic Companies.” Available at https://data.worldbank.org/indicator/CM.MKT.LCAP.CD?end=2017&start=1975.

      3 World Federation of Exchanges. 2019. “Welcome to the Future of Markets.” Available at https://www.world-exchanges.org/.

PART One Background

CHAPTER 2 Ownership Structure and Stock Classes

       Christopher J. Barnesler

      Equity Research, Deutsche Bank AG

       Ehsan Nikbakhtler

      C. V. Starr Distinguished Professor of Finance and International Financial Services

      Frank G. Zarb School of Business, Hofstra University

       Andrew C. Spieler

      Robert F. Dall Distinguished Professor of Business

      Frank G. Zarb School of Business, Hofstra University

INTRODUCTION

      A commonly held view is that all common stock issues are the same. Although overwhelmingly true for most companies, several exceptions exist to this concept. The most apparent exception is multiple-class common stock, more commonly known as dual-class stock, which offers shareholders in one class of stock superior voting rights relative to shareholders in a separate class.

      Before comparing single-class

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