Investor concerns about climate and other environmental regulatory risks suggest that these risks should affect corporate bond risk assessment and pricing. We test this hypothesis and find that firms with poor environmental profiles or high carbon footprints tend to have lower credit ratings and...

Climate change is increasing the frequency of natural disasters, which could make municipal bonds a riskier asset class. We study the effects of natural disasters on municipal bond returns, exploiting the repeat sales approach to overcome the challenge that municipal bonds trade extremely...

In asset pricing, estimation risk refers to investor uncertainty about the parameters of the return or cashflow process. We show that with estimation risk the observable properties of prices and returns can differ significantly from the properties perceived by rational investors. In particular,...

We investigate the portfolio choices of mean-variance-optimizing investors who use sample evidence to update prior beliefs centered on either risk-based or characteristic-based pricing models. With dogmatic beliefs in such models and an unconstrained ratio of position size to capital, optimal...

In this article, we examine the effect of the imperfect mobility of goods on international risk sharing and, through that, on the investment in risky projects, welfare and growth. We find that the welfare gain of financial market openness is not monotonic with respect to investors' risk aversion...

We view sustainability as a requirement that welfare should not be expected to decline over time. We impose this requirement as a prior constraint on the consumption-savings-investment problem, and study its implications for saving, risky investment, and the social discount rate. The constraint...

Green energy is produced by relationship-specific assets that are vulnerable to hold-up if contracts are not strictly enforced. I study the role of counterparty risk in the procurement of green energy using data on the universe of solar procurement auctions in India. The Indian context allows...

We examine the effect of uncertainty on foreign direct investment inflows for a heterogeneous sample of advanced, emerging market and developing countries over a 25 year long (pre-Covid) sample. Using a push-pull framework, and controlling for both global and local factors, we find policy...

This paper proposes a simple homogeneous dynamic model of investment and corporate risk management for a financially constrained firm. Following Froot, Scharfstein, and Stein (1993), we define a corporation's risk management as the coordination of investment and financing decisions. In our...

We study a competitive credit market in which lenders with partial knowledge of loan repayment use one of three decision criteria - maximization of expected utility, maximin, or minimax regret - to make lending decisions. Lenders allocate endowments between loans and a safe asset, while...