This paper provides a dynamic optimization model of durable good inventories to study the interactions between investment demand and production of capital goods. There are three major findings: First, capital suppliers' inventory behavior makes investment demand more volatile in equilibrium;...

Irreversible investment and the techniques associated with pricing real options have led to significant advances many areas. We broaden this range of applications, showing how the techniques can apply to many policy problems in finance, macroeconomics, and trade policy. With small changes,...

Presentation to the Missouri Valley Economics Association, St. Louis, MO - Feb. 28, 2003

Presentation to the Missouri Valley Economics Association, St. Louis, MO - Feb. 28, 2003

Presented at Policy Making After the Crisis, New York City, NY.

This paper investigates whether investors are compensated for taking on commonality risk in equity portfolios. A large literature documents the existence and the causes of commonality in illiquidity, but the implications for investors are less understood. We find a return premium for commonality...

This paper provides a simple dynamic optimization model of durable goods inventories. Closed-form solutions are derived in a general equilibrium environment with imperfect information and serially correlated shocks. The model is then applied to scrutinize some popular conjectures regarding the...

We show that predictable covariances between means and variances of stock returns may have a first order effect on portfolio composition. In an international asset menu that includes both European and North American small capitalization equity indices, we find that a three-state, heteroskedastic...

Manufacturing employment in the United States has tended to fall since 1979. Geographically, the Northeast and Mideast regions have incurred the brunt of this decline and, except in the Southwest region, urban countries have tended to fare worse than rural countries. Meanwhile, foreign-owned...