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Case
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Reference no. 9-296-077
Subject category: Finance, Accounting and Control
Authors: Kenneth A Froot (Harvard Business School); Andre F Perold (Harvard Business School)
Published by: Harvard Business Publishing
Originally published in: 1996
Version: 27 April 2006
Length: 19 pages
Data source: Published sources
Topics: Capital-asset-pricing; Cash accounting; Costs of bankruptcy; Financial engineering; Weighted-average-cost-of-capital method; Present value; Capital markets; International finance; Valuation; International entrepreneurial finance; Barriers to entry; Black markets; Cash flow
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Abstract

Royal Dutch and Shell common stocks are securities with linked cash flow, so that the ratio of their stock prices should be fixed. In fact, the ratio is highly variable, moving with the markets where the securities are intensively traded. Royal Dutch trades more actively in the Netherlands and US markets, whereas Shell trades more actively in the United States. The result is that the Royal Dutch / Shell relative price moves positively with the Netherlands and US markets and negatively with the UK market. The ability to arbitrage these disparities and their causes are major case focal points.
Industry:
Finance & insurance
Teaching note
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Reference no. 5-201-093
Subject category: Finance, Accounting and Control
Authors: Kenneth A Froot (Harvard Business School)
Published by: Harvard Business Publishing
Originally published in: 2001
Version: 27 April 2006
Length: 12 pages
View full details

About

Abstract

Royal Dutch and Shell common stocks are securities with linked cash flow, so that the ratio of their stock prices should be fixed. In fact, the ratio is highly variable, moving with the markets where the securities are intensively traded. Royal Dutch trades more actively in the Netherlands and US markets, whereas Shell trades more actively in the United States. The result is that the Royal Dutch / Shell relative price moves positively with the Netherlands and US markets and negatively with the UK market. The ability to arbitrage these disparities and their causes are major case focal points.

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Industry:
Finance & insurance

Related

Teaching note
-
Reference no. 5-201-093
Subject category: Finance, Accounting and Control
Authors: Kenneth A Froot (Harvard Business School)
Published by: Harvard Business Publishing
Originally published in: 2001
Version: 27 April 2006
Length: 12 pages
View full details