We compare in a backtesting study the performance of univariate models for Value-at-Risk (VaR) and expected shortfall based on stable laws and on extreme value theory (EVT). Analyzing these different approaches, we test whether the sum - stability assumption or the max - stability assumption,...

There are many conflicting interpretations of security prices and price determination in financial markets. They range from academic theories based on efficient markets and rational expectations hypotheses, to more traditional methods of fundamental analysis, to theories of quot;valuequot; and...

The random walk hypothesis is rejected for foreign stock market prices. Variance ratio tests are performed on weekly stock prices of nine major foreign stock market indices. While longer-term returns follow random walks, short-horizon, bi-weekly returns exhibit significant positive serial...

Studies of household stock market participation report low participation rates. The explanations cited are that the fixed costs associated with participation and high risk aversion discourage households from buying stocks. However, the low participation rate findings are unchallenged. We argue...

Roll [JFE 1977] demonstrates that the probability of early exercise of equity call options is low for small dividend payouts. Geske and Shastri [JBF 1985] show that unless dividends are small, put equity options would not be exercised early. Subsequently, Shastri and Tandon [JFM 1986] argue that...

This theoretical paper seeks to correct a common error about the effect of personal taxation on the expected pre-tax return earned on equity portfolios held by mutual funds in tax-sheltered retirement plans such as IRA and Keogh (401-k). Contrary to the prevailing view, the analysis reveals that...

Since the work by Stigler on the economics of information in the early 1960s, economists have paid closer attention to the role of search for information. However, search methods are not considered in the theory of portfolio choice. We present a model of investor search behavior in order to...

This paper challenges accepted methods of calculating the effect of deferred realization on the effective rate of capital gains tax paid by common shareholders and their overall tax burden. Those methods are shown to implicitly assume the special case of gains accrued in lump sum, even under the...