This paper develops a novel approach to information-based securities trading by characterizing the hidden state of the market, which varies following a Markov process. Extensive simulation demonstrates that the approach can successfully identify market states and generate measures of...

This paper shows a sharp contrast between theoretical predictions of merger negotiations when takeover markup and runup are measured in dollar vs rate terms. It argues that the empirical tests by an influential study cannot reject the hypothesis of a costly feedback loop as the authors claim....

This paper develops a novel approach to information-based securities trading by characterizing the hidden state of the market, which varies following a Markov process. Extensive simulation demonstrates that the approach can successfully identify market states and generate dynamic measures of...

This paper develops an equilibrium model featuring heterogeneity in investor risk tolerance across different risk sources. Using Australian data, it confirms the theoretical predictions of the model, by showing that a higher imputation credit yield in one year leads to a lower stock return in...