We estimate the parameters of pricing kernels that depend on both aggregate wealth and state variables that describe the investment opportunity set, using FTSE 100 and S&P 500 index option returns as the returns to be priced. The coefficients of the state variables are highly significant and...

Dollar Cost Averaging is a strategy for purchasing equity securities that is widely recommended by professional investment advisors and commentators, but which has been virtually ignored by academic theorists and textbook writers. In this paper we explore whether the strategy is but another...

One issue in the argument about the merits of pegged and floating exchange rates involves the magnitude of transactions costs in the foreign exchange market under alternative exchange rate regimes. The higher the transactions costs, the greater the deterrence to international trade. Moreover,...

Agency problems in firms are prevalent because effective corporate monitors are scarce. This paper presents a model that formalizes the scarcity of effective monitors and explores its implications for corporate monitoring mechanisms and ownership structures. We call the most effective monitors -...

This study analyzes the automobile purchase behavior of all residents of two Finnish provinces over several years. It finds that a consumer's purchases are strongly influenced by the purchases of his neighbors, particularly purchases in the recent past and by neighbors who are geographically...

This paper presents an empirical test of the Brennan Kraus (1987) hypothesis of convertible bond financing, according to which firms signal their volatility by their choice of terms of the convertible issue. With additional assumptions about the nature of investors’ prior beliefs about...

We identify four alternative performance metrics used in value based management (VBM). (1) Basic is an intrinsic value analysis (IVA), the discounted cash flow (DCF) methodology. (2) We show that this framework will be consistent with returns to shareholder (RTS, capital gains plus dividends)...

We develop a simple framework for analyzing a finitehorizon investor’s asset allocation problem under inflation when only nominal assets are available. The investor’s optimal investment strategy and indirect utility are given in simple closed form. Hedge demands depend on the...

We present a dynamic model of production in which a firm’s output increases when its managers share their information. Communication of ideas depends on the quality of the firm’s internal language. We prove that firms with richer languages (i.e., more organizational capital) will...

This article describes a methodology for evaluating information technology investments using the real options approach. IT investment projects are categorized into development and acquisition projects depending upon the time it takes to start benefiting from the IT asset once the decision to...