The Chicago Board of Trade Treasury Bond Futures Contract allows the short position several delivery options as to when and with which bond the contract will be settled. The timing option allows the short position to choose any business day in the delivery month to make delivery. In addition,...

This paper uses an option valuation model of the firm to answer the question, "What magnitude tax advantage to debt is consistent with the range of observed corporate debt ratios?" We incorporate into the model differential personal tax rates on capital gains and ordinary income. We conclude...

Equilibrium in the market for real assets requires that the price of those assets be bid up to reflect the tax shields they can offer to levered firms. Thus, there must be an equality between the market values of real assets and the values of optimally levered firms. The standard measure of the...

Active portfolio management is commonly partitioned into two types of activities: market timing, which requires forecasts of broad-based market movements, and security analysis, which requires the selection of individual stocks that are perceived to be underpriced by the market. Merton (1981)...

It is well known that an unbiased forecast of the terminal value of a portfolio requires compounding at the arithmetic mean return over the investment horizon. However, the maximum-likelihood practice, common with academics, of compounding at the estimator of mean return results in upward biased...

We examine abnormal stock returns surrounding contemporaneous earnings and dividend announcements in order to determine whether investors evaluate the two announcements in relation to each other.We find that there is a statistically significant interaction effect.The abnormal return...

Equilibrium in the market for real assets requires that the price of those assets be bid up to reflect the tax shields they can offer to levered firms.Thus there must be an equality between the market values of real assets and the values of optimally levered firms. The standard measure of the...

A number of futures contracts conveys to the short position various delivery options regarding the quality and exact timing of delivery. Moreover, the compensation to the long position is not solely determined by the market value of the delivered asset at the time of delivery. Sometimes, the...