Traditional theories of asset pricing assume there is a complete market participation, in the sense that all investors participate in all markets. In that case, preferences shocks typically have only a small effect on asset prices and are not an important determinant of asset price volatility....

A simple model is constructed to analyze the effects of a "market discipline" strategy which ends de facto government insurance of legally uninsured depositors. This strategy can induce behavioral responses by bank managers and depositors which mitigate the amount of liability being shifted to...

We propose a simple test for the random walk hypothesis using variance estimators derived from data sampled at different frequencies. This Hausman--type specification-test exploits the linearity of the variance of random walk increments in the observation interval by comparing the (per unit...

This paper derives simple closed-form solutions for expected rates of return on stocks and riskless one-period bills under the assumption that shocks to the growth rates of consumption and dividends are generated by a Markov regime-switching process. These closed-form solutions are used to show...

In a capital budgeting decision, timing is often an important part of the decision-maker’s opportunity set. The ability of the manager to choose when to undertake an investment has similarities to the ability of the holder of a securities option to choose when to exercise that option. This...

Secondary loan participations, or loan "stripping," is a recent innovation in banking. In a secondary loan participation, or loan sale, a bank makes a loan and then sells the loan, without recourse, to a third party. Bank loans hitherto were nonmarketable securities which could only be removed...