We investigate bivariate regime‐switching in daily futures‐contract returns for the US stock index and ten‐year Treasury notes over the crisis‐rich 1997–2005 period. We allow the return means, volatilities, and correlation to all vary across regimes. We document a striking contrast...

Financial theory holds that firms can control agency costs through the use of short-term and secured debt. We examine the relation between the use of secured debt and the incentive of the manager to increase the risk of the firm, as measured by vega. We find that firms utilize secured debt to a...

This paper forecasts earnings per share four- and eight- quarters ahead for 30 Dow firms using out-of-sample combination forecast methods. We show that many financial/economic variables, such as price-earnings ratio, dividend yield and Treasury bill rate, fail to predict out-of-sample EPS...

We examine managerial compensation and wealth sensitivities around CEO changes. The average new CEO is incentivized to increase the risk of the firm primarily because he holds significantly less stock than his predecessor, and in fact riskier policy choices are subsequently implemented. Similar...

Purpose – The purpose of this paper is to investigate the extent to which introduction of ETFs reduces short-sale constraints in their constituent stocks. Design/methodology/approach – First, the introduction of ETFs increases short interest for stocks that they hold. Second, the increase in...

We examine whether time variation in the comovements of daily stock and Treasury bond returns can be linked to measures of stock market uncertainty, specifically the implied volatility from equity index options and detrended stock turnover. From a forward-looking perspective, we find a negative...

We report international, style, and subperiod evidence for the other January effect (OJE) documented in Cooper et al. [2006. The other January effect. Journal of Financial Economics 82, 315-341]. When examining the OJE in 22 countries starting as early as 1801, we find that the spread between...

This article reports new empirical results on the information content of implied volatility, with respect to modeling and forecasting the volatility of individual firm returns. The 50 firms with the highest option volume on the Chicago Board Options Exchange between 1988 and 1995 are examined....