Intuitively, we would expect that an increase in the military preparations of potential enemies imply that the rival perceives an increase in the likelihood of future conflict. In this paper, we present a simple model that suggests that, surprisingly, the relationship is ambiguous. We find that...

In the defense policy literature, it is widely believed that there is a pronounced bias towards the procurement of a less than optimal number of excessively sophisticated weapons. In this paper, we consider the possibility that this perceived bias is the result of the timing and informational...

A model of farmland accumulation analyzes the impact of credit allocation and the level of debt on farmland prices. The model stresses the importance of the real net wealth accumulated by the farming sector on the lending procedures for farmland purchases. It is shown that credit allocated on...

Yitzhaki (1996) showed that the OLS estimator of the slope coefficient in a simple regression is a weighted average of the slopes delineated by adjacent observations. The weights depend only on the distribution of the independent variable. In this paper I demonstrate that equal weights can only...

Marginal Conditional Stochastic Dominance (MCSD) states the probabilistic conditions under which, given a specific portfolio, one risky asset is marginally preferred to another by all risk-averse investors. Furthermore, by increasing the share of dominating assets and reducing the share of...

One main advantage of the mean-variance (MV) portfolio frontier is its simplicity and ease of derivation. Its major shortcoming lies in its familiar restrictions, such as the quadraticity of preferences or the normality of distributions. We analytically derive the Mean-Gini (MG) efficient...

The paper looks at the rationale behind popular financial advice on portfolio allocation among cash, bonds, and stocks and proposes an additional solution to the asset allocation puzzle that claims popular advice is not consistent with financial theory (Canner, Mankiw, and Weil (1997)). We offer...

As a two-parameter model that satisfies stochastic dominance, the mean-extended Gini model is used to build efficient portfolios. The model also quantifies risk aversion heterogeneity in capital markets. Using a simple Edgeworth box framework, we show how capital market equilibrium is achieved...

This paper presents evidence that Ordinary Least Squares estimators of beta coefficients of major firms and portfolios are highly sensitive to observations of extremes in market index returns. This sensitivity is rooted in the inconsistency of the quadratic loss function in financial theory. By...