Analyzing 916 CDOs, we find that a top credit rating agency frequently made positive adjustments beyond its main model that amounted to 12.1% larger AAA tranche sizes. These adjustments are difficult to explain by likely determinants, but exhibit a clear pattern: CDOs with smaller model-implied...

We examine whether "rating shopping" or "rating catering" is a more accurate characterization of rating agency interactions regarding collateralized debt obligations (CDOs). Although investors paid a premium for dual ratings, AAA CDO tranches rated by both Moody's and S&P defaulted more...

We present an empirical study of the pricing effect of liquidity in the credit default swaps (CDS) market. We construct liquidity proxies to capture various facets of CDS liquidity including adverse selection, search frictions, and inventory costs. We show that the liquidity effect on CDS...

We study a structural model that allows us to examine how credit spreads are affected by the interaction of macroeconomic conditions and firm characteristics. Unlike most other structural models, our model explicitly incorporates equilibrium macroeconomic dynamics and models a firm's cash flow...

This paper studies model uncertainty associated with predictive regressions in asset return predictability research. We comprehensively investigate the performance of Bayesian model averaging (BMA), first introduced to the literature by Avramov (2002) and Cremers (2002), when applied to linear...

A unique governance structure for mutual funds is a unitary board - one board overseeing all funds in the entire fund family. In this paper, we examine the role played by unitary board in mutual fund governance, along with other governance mechanisms such as board independence and director...

This study empirically examines the impact of the interaction between market and default risk on corporate credit spreads. Using credit default swap (CDS) spreads, we find that average credit spreads decrease in GDP growth rate, but increase in GDP growth volatility and jump risk in the equity...

We propose an empirical study on the pricing effect of liquidity level and liquidity risk in the credit default swaps (CDS) market. CDS is the key constituent of the fast growing credit derivatives market that has $34.4 trillion in total notional value by the end of 2006. Credit derivatives play...