Equity returns are more dependent in bear markets than in bull markets. Previous studies have argued that a multivariate GARCH model or a regime switching (RS) model based on normal innovations could reproduce this asymmetric extreme dependence. We show analytically that it cannot be the case....

We investigate the implications of ambiguity aversion for retained earnings. We show that firms can eliminate distortions such as underinvestment by paying out earnings that maximizes shareholder wealth. We show that there is a negative relationship between ambiguity and retained earnings and...

We investigate the “new equity puzzle” using an approach that allows us to analyze the structural change in both alpha and systematic risk after the event. Brav, Geczy, and Gompers (2000) and Eckbo, Masulis, and Nodi (2000) cast doubt on the validity of matched-firm adjusted returns as a...

How the correlation between equity returns behaves during market turmoils has been an issue of discussion in the international finance literature. Some research suggest an increase of correlation during volatile periods [Ang and Bekaert, 2002], while others argue its stability [Forbes and...