In this study, a dynamic-optimizing framework is developed in which the interaction between the firm’s real and financial decisions may be examined. The derivation of the objective function is based explicitly on the maximization of shareholder wealth subject to the firm’s cashflow and...

In this paper, we test the random walk hypothesis for weekly stock market returns by comparing variance estimators derived from data sampled at different frequencies. The random walk model is strongly rejected for the entire sample period (1962-1985) and for all sub-periods for a variety of...

We propose a simple test for the random walk hypothesis using variance estimators derived from data sampled at different frequencies. This Hausman--type specification-test exploits the linearity of the variance of random walk increments in the observation interval by comparing the (per unit...

This paper examines the stochastic properties of aggregate macroeconomic time series from the standpoint of fractionally integrated models, and focuses on the persistence of economic shocks. We develop a simple macroeconomic model that exhibits long-term dependence, a consequence of aggregation...

A new methodology for statistically testing contingent claims asset-pricing models based on asymptotic statistical theory is developed. It is introduced in the context of the Black-Scholes-Merton option pricing model, for which some promising estimation, inference, and simulation results are...

In this paper, it is shown that risk aversion plays a critical role in the determination of the equilibrium stock prices and their variability in a one-asset pure exchange economy. Specifically, it is argued that the variance of equilibrium stock prices is a strictly increasing convex function...

Two of the most widely used statistical techniques for analyzing discrete economic phenomena are discriminant analysis (DA) and logit analysis. For purposes of parameter estimation, logit has been shown to be more robust than DA. However, under certain distributional assumptions both procedures...

We investigate the extent to which tests of financial asset pricing models may be biased by using properties of the data to construct the test statistics. Specifically, we focus on tests using returns to portfolios of common stock where portfolios are constructed by sorting on some empirically...

We examine the finite sample properties of the variance ratio test of the random walk hypothesis via Monte Carlo simulations under two null and three alternative hypotheses. These results are compared to the performance of the Dickey-Fuller t and the Box-Pierce Q statistics. Under the null...