We show that credit risk accounts for only a small fraction of the observed corporate-Treasury yield spreads for investment grade bonds of all maturities, with the fraction smaller for bonds of shorter maturities; and that it accounds for a much higher fraction of yield spreads for junk bonds....

No consensus has yet emerged from the existing credit risk literature on how much of the observed corporate-Treasury yield spreads can be explained by credit risk. In this paper, we propose a new calibration approach based on historical default data and show that one can indeed obtain consistent...

Part ownership of a takeover target can help a bidder win a takeover auction, often at a low price. A bidder with a toehold bids aggressively in a standard ascending auction because its offers are both bids for the remaining shares and asks for its own holdings. While the direct effect of a...

We show that credit risk accounts for only a small fraction of yield spreads for investment-grade bonds of all maturities, with the fraction lower for bonds of shorter maturities, and that it accounts for a much higher fraction of yield spreads for high yield bonds. This conclusion is shown to...

We investigate the effect of scale on performance in the active money management industry. We first document that fund returns, both before and after fees and expenses, decline with lagged fund size, even after adjusting these returns by various performance benchmarks. We then explore a number...

We study the impact of transaction costs on portfolio selection and equilibrium asset returns in an economy in which investors who face surprise liquidity shocks invest in liquid and illiquid riskless assets. We find that the portfolio policy and the equilibrium liquidity premium of investors...