In this paper, we examine the behavior of stock prices of individual firms with different bond ratings surrounding the October market crash of 1987 and therefrom make inferences about the significance of bankruptcy costs borne by stockholders. The key findings are as follows: Immediately...

Das et al. (2010) develop an elegant framework where an investor selects portfolios within mental accounts but ends up holding an aggregate portfolio on the mean–variance frontier. This investor directly allocates the wealth in each account among available assets. In practice, however,...

In Das, Markowitz, Scheid, and Statman (2010), an investor divides his or her wealth among mental accounts with short selling being allowed. For each account, there is a unique goal and optimal portfolio. Our paper complements theirs by considering estimation risk. We theoretically characterize...