We study how heterogeneous beliefs affect returns and examine whether heterogeneous beliefs are a priced factor in traditional asset pricing models. To accomplish this task, we suggest new empirical measures based on the disagreement among analysts about expected (short-term and long-term)...

Most investors purchase securities knowing they will resell those securities in the future. Uncertainty about the preferences of future trading counter-parties causes randomness in future resale prices that we call liquidity risk. It is natural to suppose that investors are asymmetrically...

``Limits of Arbitrage" theories require that the marginal investor in a particular asset market be a specialized arbitrageur. Then the constraints faced by this arbitrageur (i.e. capital constraints) feed through into asset prices. We examine the mortgage-backed securities (MBS) market in this...

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...

In this paper we ask the empirical question are bond covenants priced? Consistent with the Costly Contracting Hypothesis (CCH) developed by Smith and Warner (1979), we find that they are. We document a negative relation between the promised yield on corporate debt issues and the presence of...

This paper investigates whether an increase in ABS issuance, or securitized products, by leasing companies has been influenced by Japanese banks’ tightened lending attitudes in 1990s. Our focus is in particular to examine the importance of asset securitization for leasing companies when...

Tax treaties are often viewed as a mechanism for eliminating tax competition, however, this approach ignores the need for bargaining over the treaty’s terms. This paper makes a first attempt at modeling the conflicting goals in treaty formation by analyzing a cooperative bargaining model...

We study the impact of corporate firm taxation over long run capital accumulation and firms dynamics in an heterogeneous firms environment. We assume there are firms with different levels of productivity choosing investment on physical capital and facing an exogenous corporate tax rate. By means...

In a federation, where different levels of government tax the same base, one can observe two types of externalities: a horizontal externality, working among jurisdictions of the same hierarchical level and leading to tax rates that are suboptimally low; and a vertical externality, working...