This paper investigates the interaction between housing prices and housing rentals. Standard economic models treat housing prices as the present discounted value of future rentals with the latter treated as exogenous. Casual observation, however, suggests that changes in rental prices often...

Because of the lack of short‐term government bonds, the interbank repo market in China has been providing the best information about market‐driven short‐term interest rates since its inception. This article examines the behavior of the repo rates of various terms and their term premiums....

Affine jump-diffusion models have been the mainstream in options pricing because of their analytical tractability. Popular affine jump-diffusion models, however, are still unsatisfactory in describing the options data and the problem is often attributed to the diffusion term of the unobserved...

It is well documented that the time-varying bond excess returns can be explained by predetermined variables such as information in the term structure and macro economic variables. Recent studies suggest that demand and supply of bonds influence bond excess returns. We extend the literature and...

We investigate why individual stocks become more volatile over the 1976–2000 period, during which quarterly accounting data are available at the firm level. On average, corporate earnings have deteriorated and their volatilities have increased over the sample period. This is more evident for...

This paper pertains to the controversy surrounding the explanatory power of certain firm-specific variables such as size and the book-to-market ratio in cross-sections of average stock returns. To investigate whether these firm-specific variables capture the sensitivity of returns to unobserved...

In this paper we investigate the properties of the standard two-pass methodology of testing beta pricing models with misspecified factors. In a setting where a factor is useless, defined as being independent of all the asset returns, we provide theoretical results and simulation evidence that...