We use stock market data to test cross-sectional implications of theories of sovereign default and provide a market-based estimate of sovereign default costs. We find that the stock prices of firms vulnerable to financial intermediation disruption, or firms more exposed to the government, are...

This paper develops an international asset-pricing model with defaultable firms and governments that demonstrates how sovereign credit risk in Europe affects US equity market prices. The risk of a sovereign debt crisis is a threat to economic growth that reduces the value of international...

In the present paper author will try to point out that government debt as a percentage of GDP has a negative impact on stock prices in the long run, while entrepreneurial caliber has a positive effect on stock prices in the long run. Data are annual and cover Western European economies for the...

Some firms create innovative financial debt and equity products to attract specific investor tastes (i.e., non-monetary preferences unrelated to expected cash flows). Innovations can be costly, but they may also widen a firm's investor base, leading to a reduction in the cost of capital. Prior...

This paper develops a framework to study general equilibrium implications for an economy in which agents are allowed to have dynamically inconsistent time and risk preferences. This framework accommodates, but is not limited to, the following settings: (1) non-exponential discounting; (2)...

This paper studies subsampling hypothesis tests for panel data that may be nonstationary, cross-sectionally correlated, and cross-sectionally cointegrated. The subsampling approach provides approximations to the finite sample distributions of the tests without estimating nuisance parameters. The...