This paper examines portfolio allocation across equity portfolios formed on the basis of characteristics like size and book-to-market. In particular, the paper assesses the impact of return predictability on portfolio choice for a multi-period investor with a coefficient of relative risk...

We generate samples of fund returns calibrated to match the U.S. mutual fund industry and simulate standard tests of performance persistence. We consider a variety of alternative return generating processes, survival criteria, and test methodologies. When survival depends on performance over...

We consider the impact of transaction costs on the portfolio decisions of a long-lived agent with isoelastic preferences. In particular, we focus on how portfolio choice, rebalancing frequency and average cost incurred change over the lifecycle are affected by return predictability. Two types of...

This paper develops a theory of mergers and divestitures wherein the motivation for mergers stems from the inability to finance marginally profitable, possibly short-horizon projects as stand-alone entities due to agency problems between managers and potential claimholders. A conglomerate merger...

A large recent literature has focused on multiperiod portfolio choice with labor income, and while the models are elaborate along several dimensions, they all assume that the joint distribution of shocks to labor income and asset returns is i.i.d.. Calibrating this joint distribution to U.S....

A large recent literature has focused on multiperiod portfolio choice with labor income, and while the models are elaborate along several dimensions, they all assume that the joint distribution of shocks to labor income and asset returns is i.i.d.. Calibrating this joint distribution to U.S....

The seminal work of Constantinides (1986) documents how, when the risky return is calibrated to the U.S. market return, the impact of transaction costs on per-annum liquidity premia is an order of magnitude smaller than the cost rate itself. A number of recent papers have formed portfoliossorted...

Many applications in financial economics use data series with different starting or ending dates. This paper describes estimation methods, based on the generalized method of moments (GMM), which make use of all available data for each moment condition. We introduce two asymptotically equivalent...

This paper studies how collateral affects bond yields. Using a large dataset of public bonds, we document that collateralized debt has higher yield than general debt, after controlling for credit rating. Our model of agency problems between managers and claimholders explains this puzzling result...

In this paper we study how collateral and loan characteristics can affect bond yields of debt. Using a large data set of all fixed rate straight debt public issues made in the period January 1, 1993 to March 31, 1995, we document that the yield on collateralized debt is higher than on general...