The question of whether and to what extent option trading impacts underlying stock prices has been of interest since options began exchange-based trading in 1973. Recent research presents evidence of an informational channel through which option trading impacts stock prices by showing that...

Conventional wisdom holds that conservative investors should avoid exposure to foreign currency risk. Even if they hold foreign equities, they should hedge the currency exposure of these positions and should hold only domestic Treasury bills. This paper argues that the conventional wisdom may be...

The question of whether and to what extent option trading impacts underlying stock prices has been a focus of intense interest since options began exchange-based trading in 1973. Despite considerable effort, no convincing evidence for a pervasive impact has been produced. A recent strand of...

The equity home bias, the observed lack of international diversification in equity portfolios, is a persistent puzzle in international finance. We propose an explanation for this puzzle based on external habit formation preferences. Agents' utility depends on the difference between consumption...

Conventional wisdom holds that conservative investors should avoid exposure to foreign currency risk. Even if they hold foreign equities, they should hedge the currency exposure of these positions and should hold only domestic Treasury bills. This paper argues that the conventional wisdom may be...

Conventional wisdom holds that conservative investors should avoid exposure to foreign currency risk. Even if they hold foreign equities, they should hedge the currency exposure of these positions and should hold only domestic Treasury bills. This paper argues that the conventional wisdom may be...