This paper develops and implements an equilibrium model of systemic risk. The model derives a systemic risk measure, loss beta, in characterizing all too-big-to-fail banks using a capital insurance equilibrium. By constructing each bank's loss portfolio with a recent accounting approach, we...

Firms can become less innovative following a sudden “inflow” of cash. Specifically, multinational firms that were eligible to repatriate (and indeed repatriated) cash to the U.S. under the American Jobs Creation Act generate less valuable patents than otherwise similar firms. They also...

We study jump variance risk by jointly examining both stock and option markets. We develop a GARCH option pricing model with jump variance dynamics and a non-monotonic pricing kernel featuring jump variance risk premium. The model yields a closed-form option pricing formula and improves in...

In modern economies, technological knowledge can flow between firms through various channels. We test an economic theory that firms most likely to benefit from such knowledge flows disclose information about their technologies more readily, probably to attract technologically compatible...

A firm's patent-to-market (PTM) ratio refers to the percentage of a firm's market value that is attributable to its patent market value. A hedging portfolio based on PTM ratio generates a monthly return of 71 basis points. The CAPM cannot be rejected for firms with low PTM ratios, but is...

Bolton, Scheinkman, and Xiong (2006) model a setting where investors disagree and short-sales constraints cause pessimistic views of stock prices to be less influential, which leads to speculative stock prices. A theoretical implication of the model is that existing shareholders can exploit the...