Linear asset-pricing relations, with macroeconomic factors as state variables, have found wide usein empirical finance. Applications of such relations range from academic studies of market efficiency andmarket anomalies to practical uses such as risk management and estimation of the cost of...

We find nonlinear feedback between the stock market and certain macroeconomic factors. This evidence calls into question the adequacy of these factors as a basis for a linear pricing model. It also means that the interaction between the economy and the stock market is more complicated than given...

The authors examine ex-dividend day share price behavior in light of the Tax Reform Act of 1986. Data from 1982 through 1991 are examined. The evidence generally supports the traditional view that differential taxation does affect the valuation of dividends and capital gains rather than the tax...

Linear and nonlinear Granger causality tests are used to examine the dynamic relation between daily Dow Jones stock returns and percentage changes in New York Stock Exchange trading volume. The authors find evidence of significant bidirectional nonlinear causality between returns and volume....

In the literature on speculative attacks on a fixed exchange rate, it is usually assumed that the monetary authority responsible for fixing the exchange rate reacts passively to the monetary disruption caused by the attack. This assumption is grossly at odds with actual experience where...

Speculative attacks on fixed or ‘fixed but adjustable’ exchange rate regimes seem to have become a standard feature of the landscape of foreign exchange markets. The supposed excesses of seemingly untethered financial markets have been documented for some time, but only recently...