type="main" <title type="main">ABSTRACT</title> <p>Contingent capital (CC), which aims to internalize the costs of too-big-to-fail in the capital structure of large banks, has been under intense debate by policy makers and academics. We show that CC with a market trigger, in which direct stakeholders are unable to choose...</p>

The stochastic discount factor (SDF) method provides a unified general framework for econometric analysis of asset-pricing models. There have been concerns that, compared to the classical beta method, the generality of the SDF method comes at the cost of efficiency in parameter estimation and...

Most empirical studies of the static capital asset pricing model (CAPM) assume that betas remain constant over time and that the return on the value-weighted portfolio of all stocks is a proxy for the return on aggregate wealth. The general consensus is that the static CAPM is unable to explain...

Without the assumption of conditional homoskedasticity, a general asymptotic distribution theory for the two-stage cross-sectional regression method shows that the standard errors produced by the Fama-MacBeth procedure do not necessarily overstate the precision of the risk premium estimates....

A German broker's clients place similar speculative trades and therefore tend to be on the same side of the market in a given stock during a given day, week, month, and quarter. Aggregate liquidity effects, short sale constraints, the systematic execution of limit orders (coordinated through...

The authors propose a likelihood- ratio test of the hypothesis that the minimum-variance frontier of a set of K assets coincides with the frontier of this set and another s et of N assets. They study the relation between this hypothesis, exac t arbitrage pricing, and mutual-fund separation. The...

The authors characterize the sets of mimicking positions whose returns can serve in place of factors in an exact K-factor arbitrage pricing relation for a set of N assets. All of the sets are K-dimensional nonsingular linear transformations of each other. The authors interpret three examples of...