In this paper, we compare the equity returns of dividend-paying and non-dividend paying firms. We find no unconditional return difference even though non-dividend paying firms have many characteristics that suggest high risk. Equivalently, because non-dividend paying firms have high...

We show that the value maximizing hurdle rate for Ramp;D is less than for conventional investment despite the fact that Ramp;D has development risk. Because development risk arises only during Ramp;D, entrepreneurs control this risk by pursuing or deferring Ramp;D. This risk management moderates...

In this paper, we report evidence that mean currency returns are positive for both a domestic investor in a foreign currency and a foreign investor in a domestic currency. A shared currency gain creates a positive volatility factor for both. Volatility dominates other return determinants that...

We show economic depreciation decreases value maximizing investment hurdle rates and encourages both maintenance and growth. Economic depreciation without maintenance decreases the upside potential of future growth opportunities upon stochastically improved profitability. Managers forestall this...

In this paper, we correct the adverse impact of estimation risk on both portfolio weights and performance with two new equity allocation methods we implement with estimation-free and estimated ex-ante returns. Portfolios with estimation-free ex-ante returns and systematic-to-unsystematic risk...

The value premium is the empirical observation that low market/book “value” stocks have higher returns than high market/book “growth” stocks. In this paper, we investigate and present evidence for an “equity as a call option hypothesis” for the value premium. Volatility decreases the...

In this paper, we investigate the relation between business profit and the demand price-elasticity of consumers. Business profit increases with a decrease in customer price-sensitivity only when the relation between a firm's net operating margin (after fixed-costs) and its price-cost margin...