In this paper, we empirically examine the relationship between return predictability and investor sentiment when the stock fundamentals exhibit regime shifts. This study is motivated by the fact that the predictive power of sentiment may be weakened if we do not separately identify the price...

This paper utilizes the static portfolio approach of Derman, Ergener, and Kani (1995) and Carr, Ellis, and Gupta (1998) to hedge and price American options under the Black-Scholes (1973) model and the constant elasticity of variance (CEV) model of Cox (1975). The static hedge portfolio (SHP) of...

In this paper, we focus on two-factor lattices for general diffusion processes with state-dependent volatilities. Although it is common knowledge that branching probabilities must be between zero and one in a lattice, few methods can guarantee lattice feasibility, referring to the property that...

The estimation of the cost of equity capital (COE) is one of the most important tasks in financial management. Existing approaches compute the COE using historical data, i.e. they are backward-looking methods. This paper derives a method to calculate forward-looking estimates of the COE using...