Fisher's Separation Theorem

AAA

DEFINITION of 'Fisher's Separation Theorem'

A theory stating that:

1. A firm's choice of investments are separate from its owner's attitudes towards the investments.

2. It is possible to separate a firm's investment decisions from the firm's financial decisions.

BREAKING DOWN 'Fisher's Separation Theorem'

This theory says a firm's value is not affected by how its investments are financed or how the distributions (dividends) are made to the owners.

RELATED TERMS
  1. Quantity Theory Of Money

    An economic theory which proposes a positive relationship between ...
  2. Distribution

    1. When trading volume is higher than that of the previous day ...
  3. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes ...
  4. Finance

    The science that describes the management, creation and study ...
  5. Principal-Agent Problem

    The principal-agent problem develops when a principal creates ...
  6. Discount Bond

    A bond that is issued for less than its par (or face) value, ...
Related Articles
  1. Active Trading

    Profiting From Panic Selling

    When everyone rushes to dump their stocks, you may find yourself with a great buying opportunity. Learn about it here.
  2. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  3. Active Trading

    10 Books Every Investor Should Read

    Want advice from some of the most successful investors of all time? Check out our reading list.
  4. Fundamental Analysis

    Is India the Next Emerging Markets Superstar?

    With a shift towards manufacturing and services, India could be the next emerging market superstar. Here, we provide a detailed breakdown of its GDP.
  5. Term

    Estimating with Subjective Probability

    Subjective probability is someone’s estimation that an event will occur.
  6. Investing Basics

    Understanding the Modigliani-Miller Theorem

    The Modigliani-Miller (M&M) theorem is used in financial and economic studies to analyze the value of a firm, such as a business or a corporation.
  7. Economics

    Explaining Kurtosis

    Kurtosis describes the distribution of data around an average.
  8. Personal Finance

    Simple Interest Loans: Do They Exist?

    Yes, they do. Here is what they are – and how to use them to your advantage.
  9. Options & Futures

    An Introduction To Value at Risk (VAR)

    Volatility is not the only way to measure risk. Learn about the "new science of risk management".
  10. Investing

    What Rising Volatility Means for Momentum

    After remaining torpid for most of the year, equity market volatility is once again rising.
RELATED FAQS
  1. What is Fisher's separation theorem?

    Fisher's separation theorem stipulates that the goal of any firm is to increase its value to the fullest extent, regardless ... Read Full Answer >>
  2. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  3. How can I use a regression to see the correlation between prices and interest rates?

    In statistics, regression analysis is a widely used technique to uncover relationships among variables and determine whether ... Read Full Answer >>
  4. How do I calculate a modified duration using Matlab?

    The modified duration gauges the sensitivity of the fixed income securities to changes in interest rates. To calculate the ... Read Full Answer >>
  5. How do I calculate the rule of 72 using Matlab?

    In finance, the rule of 72 is a useful shortcut to assess how long it takes an investment to double given its annual growth ... Read Full Answer >>
  6. How do I calculate the standard error using Matlab?

    In statistics, the standard error is the standard deviation of the sampling statistical measure, usually the sample mean. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  2. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  3. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  4. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  5. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  6. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!