Recent studies by Hanlon, Myers, and Shevlin (2001) and Dhaliwal et al. (2001) have stirred considerable interest in the topic of dividend tax capitalization. In these papers HMS and DEMB take a critical look at the theory and findings in Harris and Kemsley (1999). In a prior paper I provide...

Recent studies by Dhaliwal et al. (2001) and Hanlon, Myers, and Shevlin (2001) raise questions regarding the dividend tax capitalization results in several of my prior studies. In this paper, I clarify the basic concepts underlying dividend tax capitalization and I provide point-by-point...

In this study, we use cross-sectional regressions to estimate the value of the debt-tax shield. Recognizing that debt is correlated with the value of operations along nontax dimensions, we estimate reverse regressions in which we regress future profitability on firm value and debt rather than...

Substantial progress has been made in extending the Black-Scholes model to incorporate such features as stochastic volatility, stochastic interest rates and jumps.On the empirical front, however, it is not yet known whether and by how much each generalized feature will improve option pricing and...

Substantial progress has been made in extending the Black- Scholes model to incorporate such features as stochastic volatility, stochastic interest rates and jumps. On the empirical front, however, it is not yet known whether and by how much each generalized feature will improve option pricing...

This paper examines the related questions, of the time-series behavior of expected returns and of return predictability, within the framework of the stock-bond pricing model proposed in Mamaysky (2002). The key advantage of the model-based approach adopted in this paper is that the quantities of...

This article empirically analyzes some properties shared by all one-dimensional diffusion option models. Using S&P 500 options, we find that when sampled intraday (or inter-day), (i) call (put) prices often go down (up) even as the underlying price goes up, and (ii) call and put prices often...

Recent empirical studies find that once an option pricing model has incorporated stochastic volatility, allowing interest rates to be stochastic does not improve pricing or hedging any further while adding random jumps to the modeling framework only helps the pricing of extremely short-term...

We derive semi-closed form solutions for the forward and futures exchange rates, European foreign currency options, currency forward options, and currency futures options when the domestic and foreign interest rate movements follow mean reverting diffusion processes. These solutions are...

This paper offers a novel explanation for why some firms prefer to pay dividends rather than repurchase shares. It is well-known that institutional investors are relatively less taxed than individual investors, and that this induces "dividend clientele" effects. We argue that these clientele...