Over the past two decades, considerable academic attention has been given to testing the relationship between accounting numbers and firm value. The Linear Information Model (LIM) has become popular for testing this relationship. Most studies find that the LIM has a negative bias relative to the...

We estimate a well-specified two-state regime-switching model for Danish stock returns. The <p> model identifies two regimes which have low return-low volatility and high return-high <p> volatility, respectively. The low return-low volatility regime dominated, except in a few, short <p> episodes, until...</p></p></p>

This paper provides simple approximations for evaluating option prices and implied volatilities under stochastic volatility. Simple recursive formulae are derived that can easily be implemented in spreadsheets. The traditional random walk assumption, dominating in the analysis of financial...

The aim of this book is to document, on a solid and convincing foundation, two public policy mistakes of the United States Government that have been extremely costly. First, the failure to combine stocks with long-term government bonds in the Social Security Trust Fund, the way other nations do,...

It is generally believed that for the power of unit root tests, only the time span and not the observation frequency matters. In this paper we show that the observation frequency does matter when the high-frequency data display fat tails and volatility clustering, as is typically the case for...

This paper presents two computational techniques and shows that these techniques can improve tests for market efficiency based on profit of trading rules. The two techniques focus on interval estimates for expected profit per trade, in contrast to the standard approach that emphasizes point...

This paper explores the mean-reverting behavior of the unemployment rate using monthly geographically disaggregated data for the period 1991:01 through 2012:02. We apply both standard unit-root tests and tests that allow for one and two structural breaks in the mean. We find evidence that favors...

This paper investigates how recent changes in market interest rates have affected risk-adjusted returns. Returns are adjusted for duration, a measure of interest rate risk. Prior to the 2007 - 2008 rate decrease, one-year Treasuries offered the best risk/return tradeoff. As a result of the rate...

Time series evidence on exchange rates has been unable to reject the random walk hypothesis. A simple structural model that accounts for target zone nonlinearities provides conclusive evidence of mean reversion in EMS exchange rates.