We use exchange-traded options to identify risks relevant to capital structure adjustments in firms. These forward-looking market-based risk measures provide significant explanatory power in predicting net leverage changes in excess of accounting data. They matter most during contractionary...

We estimate a reduced-form model of credit risk that incorporates stochastic volatility in default intensity via stochastic time-change. Our Bayesian MCMC estimation method overcomes nonlinearity in the measurement equation and state-dependent volatility in the state equation. We implement on...

We estimate asset pricing models with multiple risks: long-run growth, long-run volatility, habit, and a residual. The Bayesian estimation accounts for the entire likelihood of consumption, dividends, and the price-dividend ratio. We find that the residual represents at least 80% of the variance...

Many U.S. corporations have frozen defined benefit (DB) pension plans, replacing new DB promises with contributions to defined contribution (DC) plans. We estimate expected DB accruals from the age-service and salary distributions of a large sample of U.S. corporate pension plans with more than...

We find that ownership by different types of institutional investor has different implications for future firm misvaluation and governance characteristics. Dedicated institutional investors decrease future firm misvaluation relative to fundamentals, as well as the magnitude of this misvaluation....

Market liquidity is expected to facilitate arbitrage, which in turn should affect the liquidity of the assets traded by arbitrageurs. We study this relationship using a unique dataset of equity and bond ETFs compiled from big trade-level data. We find that liquidity is an important determinant...

I compare the timing of information acquisition among institutional investors and sell-side analysts, and I show that hedge fund trades predict the direction of subsequent analyst ratings change reports while other investors' trades do not. In addition, hedge funds reverse trades after analyst...

We find that firm-level variance risk premium, estimated as the difference between option-implied and expected variances, has a prominent explanatory power for credit spreads in the presence of market- and firm-level risk control variables identified in the existing literature. Such a...

Using only daily data on bond and stock returns, we identify and characterize flight to safety (FTS) episodes for 23 countries. On average, FTS days comprise less than 3% of the sample, and bond returns exceed equity returns by 2.5 to 4%. The majority of FTS events are country-specific not...

We document a robust positive relationship between the belief dispersion about macroeconomic conditions among household investors and the stock market trading volume, using more than 30 years of household survey data and a novel approach to measuring belief dispersions. Notably, such a...