Some people are motivated by the non-selfish, non-strategic, and non-consequentialist “sacredvalue” of Truth. We conduct the first experiment directly assessing this phenomenon. We findthat people differ substantially in their truthfulness, with a large minority powerfully inclined...

We consider a risky asset whose instantaneous rate of returntakes two dierent values and changes from one to the other one at randomtimes which are neither known, nor directly observable. We study the optimalallocation strategy of traders who, in the presence of cost of transactions, investin...

In this article, we study the effect of liquidity risk on the performanceof various hedge fund portfolio strategies. The portfolio strategies in eachhedge fund style are formed by incorporating predictability in: (i) managerialskills, (ii) fund risk loadings, and (iii) benchmark returns. As...

This paper develops a dynamic trade-off model of optimal capital structure that takes intoaccount the fact that most firms have both invested assets and growth opportunities. Thesetwo sources of value react quite differently to business cycle risk. In particular, growth optionsare more sensitive...

This article examines the recent regulatory developments with regard to shortselling. Short selling regulation is an important factor in firm governancebecause it affects the way in which firms are subject to market discipline. Asthe financial crisis has attracted regulators’ notice to short...

This paper studies the extent to which risk-taking incentives of CEOs and other governancefeatures in a range of years prior to the recent financial crisis were related to the write-downsof U.S. financial institutions during the crisis. We document that institutions whose CEOs hadparticularly...