Non-U.S. firms cross-listing shares on U.S. exchanges as American Depositary Receipts earn cumulative abnormal returns of 19 percent during the year before listing, and an additional 1.20 percent during the listing week, but incur a loss of 14 percent during the year following listing. We show...

type="main" xml:lang="en" <title type="main">ABSTRACT</title> <p>Firms and institutions are monitored and controlled through a complex set of implicit and explicit contractual relations. Because of these agency theoretic relations, institutional behavior in financial markets is not a simple reflection of the preference...</p>

Milton Friedman argued that irrational traders will consistently lose money, will not survive, and, therefore, cannot influence long-run asset prices. Since his work, survival and price impact have been assumed to be the same. In this paper, we demonstrate that survival and price impact are two...

Incentive fees for money managers are frequently accompanied by high-water mark provisions that condition the payment of the performance fee upon exceeding the previously achieved maximum share value. In this paper, we show that hedge fund performance fees are valuable to money managers, and...

The common folklore that giving options to agents will make them more willing to take risks is false. In fact, no incentive schedule will make all expected utility maximizers more or less risk averse. This paper finds simple, intuitive, necessary and sufficient conditions under which incentive...

type="main" <title type="main">ABSTRACT</title> <p>We can only estimate the distribution of stock returns, but from option prices we observe the distribution of state prices. State prices are the product of risk aversion—the pricing kernel—and the natural probability distribution. The Recovery Theorem enables us to...</p>