Valuation theory does not specify the combined impact of both growth and the tax shield of debt on the cost of capital, the cost of equity, and systematic risk. This paper fills that gap in the literature. Our results demonstrate that the widely used Mamp;M models are inappropriate for a firm...

Many companies have granted large numbers of employee incentive stock options, and there is intense debate as to how they should be reported on financial statements. According to the mission statements of the regulatory organizations responsible for financial statements, the primary purpose of...

We develop and apply a valuation model that quantifies the interest rate risk inherent in fixed rate reverse mortgages. Consistent with intuition, our results show that the interest rate risk of a reverse mortgage is greater than that of either a typical coupon bond or a regular mortgage....

Keynes (1923) and Hicks (1939), hypothesized that futures prices are downward biased estimates of expected spot prices. Any empirical study that employs returns on futures contracts is actually a joint test of both the Keynes-Hicks hypothesis and of the assumed model of returns. Models based on...

For an individual or company that is subject to taxes, we develop a method that uses laddered Separate Trading of Registered Interest and Principal (STRIP) bonds to determine the value (and composition) of a portfolio that replicates a risk-free after-tax cash flow that will occur on a single...

We investigate whether persistent macroeconomic variables can be reliably shown to predict momentum profits. We find that when predictor variables are persistent and the predictive relationship is estimated over a period that overlaps the momentum portfolio formation period, predicted returns...

We investigate why trading costs through Electronic Communication Networks (ECNs) are lower than trading costs with market makers through estimating the components of the bid-ask spread. Additionally, we show how the composition and size of bid-ask spreads change with the market environment. We...