Do financial markets properly reflect leverage? Unlike Gomes and Schmid (2010) who examine this question with a structural approach (using long-term monthly stock characteristics), my paper examines it with a quasi-experimental approach (using short-term a discrete event). After a firm has...

Estimation of the terminal value is a critical aspect of any corporate valuation. In a path breaking paper, Bradley and Jarrell showed that traditional methods for estimating the terminal value typically failed to deal properly with inflation. The premise underlying the Bradley-Jarrell analysis,...

One simple way for a hypothetical investor to update an estimate of expected returns is to apply the Bayes rule. In its simplest form this involves no information other than an estimate of the prior distribution and historical data on stock returns. However, such a simple method of updating...

In this paper, we develop an enhanced corporate valuation model based on the implied cost of equity capital (ICC). We argue that the enhanced approach extends the standard market multiples and discounted cash flow (DCF) approaches to corporate valuation. Specifically, it incorporates positive...

Our paper investigates extended abnormal returns for S&P 500 index changes in a comprehensive 1979-2015 sample. The literature's depiction of longer window returns lacked both appropriate nuance and cross-sectional analysis. Solid evidence for reversion appears in the 2000s. It suggests that...

A number of prominent papers in the literature have estimated the average speed of adjustment (SOA) of firms' leverage ratios with estimators not designed for applications in which the dependent variable is a ratio. These statistics indicate mean reversion, which the papers mistakenly...