The value of a firm's securities measures the value of the firm's productive assets. If the assets include only capital goods and not a permanent monopoly franchise, the value of the securities measures the value of the capital. Finally, if the price of the capital can be measured or inferred,...

How do investors respond to predictable shifts in profitability? We consider how demographic shifts affect profits and returns across industries. Cohort size fluctuations produce forecastable demand changes for age-sensitive sectors, such as toys, bicycles, beer, life insurance, and nursing...

We are interested in the effect of capital income taxes upon security prices when investors face locally segmented stock markets and a global bond market. Therefore, we analyze an equilibrium model of an economy with binomial uncertainty, an exogenous risk-free interest rate, and a...

The recent volatility of stock prices has caused many people to conclude that investors have become irrational in valuing at least some stocks. This paper investigates the behavior of the volatility of stocks on the Nasdaq, which tend to be smaller companies with more growth options, in relation...

Minimalist economists stubbornly resist Charles Kindleberger's characterization of investor expectations in a financial bubble as "irrational." This paper seeks to resolve the controversy by imbedding Kindleberger's well-researched, impressionistic theory of financial crises into an expanded,...

The supply/demand of a security in the market is an intertemporal, not a static, object and its dynamics is crucial in determining market participants' trading behavior. Previous studies on the optimal trading strategy to execute a given order focuses mostly on the static properties of the...

It is a common practice in finance to estimate volatility from the sum of frequently-sampled squared returns. However market microstructure poses challenges to this estimation approach, as evidenced by recent empirical studies in finance. This work attempts to lay out theoretical grounds that...