Following the introduction of the one-child policy in China, the capital-labor (K/L) ratio of China increased relative to that of India, and, simultaneously, FDI inflows relative to GDP for China versus India declined. These observations are explained in the context of a simple neoclassical OLG...

This study compares and contrasts the multiple characterizations of mean reversion in financial time series as regards the restrictions they imply. This is accomplished by translating them into statements about an alternative measure, the "Average Crossing Time" or ACT. We argue that the ACT...

In Merton (1987), idiosyncratic risk is priced in equilibrium as a consequence of incomplete diversification. We modify his model to allow the degree of diversification to vary with average idiosyncratic volatility. This simple recognition results in a state-dependent idiosyncratic risk premium...

We consider a simple variant of the standard real business cycle model in which shareholders hire a self-interested executive to manage the firm on their behalf. A generic family of compensation contracts similar to those employed in practice is studied. When compensation is convex in the firm's...

American call and put options on the S&P 500 index futures that violate the stochastic dominance bounds of Constantinides and Perrakis (2007) over 1983-2006 are identified as potentially profitable investment opportunities. Call bid prices more frequently violate their upper bound than put bid...

We document widespread violations of stochastic dominance in the one-month S&P 500 index options market over the period 1986-2002. These violations imply that a trader can improve her expected utility by engaging in a zero-net-cost trade. We allow the market to be incomplete and also imperfect...