We construct a model for pricing sovereign debt that accounts for the risks of both default and restructuring, and allows for compensation for illiquidity. Using a new and relatively efficient method, we estimate the model using Russian dollar-denominated bonds. We consider the determinants of...

This paper studies "predatory trading", trading that induces and/or exploits the need of other investors to reduce their positions. We show that if one trader needs to sell, others also sell and subsequently buy back the asset. This leads to price overshooting and a reduced liquidation value for...

We provide a formal test of the liquidity preference hypothesis (LPH), that is, the monotonicity of ex ante term premiums, using nonparametric estimates that do not require a structural model for conditional expected returns. Although the point estimates of the term premiums are consistent with...

The authors investigate the cross-sectional relation between industry-sorted stock returns and expected inflation, and they find that this relation is linked to cyclical movements in industry output. Stock returns of noncyclical industries tend to covary positively with expected inflation, while...

This paper explores a model based on agents with heterogenous beliefs facing short sales restrictions, and its explanation for the rise, persistence, and eventual fall of Internet stock prices. First, we document substantial short sale restrictions for Internet stocks. Second, using data on...

We investigate the empirical implications of using various measures of payout yield rather than dividend yield for asset pricing models. We find statistically and economically significant predictability in the time series when payout (dividends plus repurchases) and net payout (dividends plus...

This article provides an analytical solution to the problem of an institution optimally managing the market risk of a given exposure by minimizing its Value-at-Risk using options. The optimal hedge consists of a position in a single option whose strike price is independent of the level of...