In this paper we investigate the theoretical relation between financial leverage and stock returns in a dynamic world where both the corporate investment and finance decisions are endogenous. We find that the link between leverage and stock returns is more complex than the static textbook...

This paper investigates the impact of heterogeneous beliefs of professional investors on the currency options market. Using a unique data set with detailed information on the foreign-exchange forecasts of about 50 market participants over more than ten years, we construct an empirical proxy for...

No, not really. Responding to lingering concerns about the reliability of SVARs, Christiano et al (NBER Macro Annual, 2006, “CEV”) propose to combine OLS estimates of a VAR with a spectral estimate of long-run variance. In principle, thiscould help alleviate specification problems of SVARs in...

We study the influence of systematic probability misestimation on complexfinancial investment decisions on the context of structured financialproducts. Structured products have in recent years become more and morecomplex. We study the question whether this complexity might be a...