We examine the dynamic forecasting behavior of security analysts in response to their prior performance relative to their peers within a continuous time/multi-period framework. Our model predicts a U-shaped relationship between the boldness of an analyst's forecast, that is, the deviation of her...

Abstract Mandatory convertibles, which are equity-linked hybrid securities that automatically convert to common stock on a pre-specified date, have become an increasingly popular means of raising capital in recent years (about $20 billion worth issued in 2001 alone). This paper presents the...

Venture capitalists enjoy incentive-laden compensation schemes where they are paid a fixed amount (management fees) plus a share of profit (success fees). This scheme is of course intended to provide venture capitalists with strong incentives under the heavy information asymmetry (Sahlman, 1982,...

This paper examines the long-run dynamics and the cyclical structure of the US stock market using fractional integration techniques. We implement a version of the tests of Robinson (1994a), which enables one to consider unit (or fractional) roots both at the zero (long-run) and at the cyclical...

Promising emerging equity markets often witness investment herds and frenzies, accompanied by an abundance of media coverage. Complementarity in information acquisition can explain these anomalies. Because information has a high fixed cost of production, its equilibrium price is low when...

This paper tests for the martingale (or random walk) hypothesis in the stock prices of a group of Asian countries. The selected countries represent well-developed markets (Hong Kong and Japan) as well as emerging markets (Korea, Taiwan and Thailand). This paper adopts a new joint variance ratio...

Macroeconomic or financial data are often modelled with cointegration and GARCH. Noticeable examples include those studies of price discovery, in which stock prices of the same underlying asset are cointegrated and they exhibit multivariate GARCH. Modifying the asymptotic theories developed in...

Macroeconomic or financial data are often modelled with cointegration and GARCH. Noticeable examples include those studies of price discovery, in which stock prices of the same underlying asset are cointegrated and they exhibit multivariate GARCH. Modifying the asymptotic theories developed in...

Credit sharing information mechanisms represent the institutional answer to the asymmetric information problems inherent to credit markets. It is generally accepted that sharing information is beneficial for the participant institutions, however, there are few studies that have measured the...

We study how a limit order book reacts to informed trades and adverse selection. We estimate Sandas'(2001) version of the classical Glosten (1994) order book model and accept it, but only for the first two prices displayed on each side of the book. We then relax one of the assumption and allow...