We investigate the effect of intermediary frictions on asset pricing by examining the role of intermediaries in the convertible bond market. Buy-and-hedge intermediaries distribute new convertible issues but face costs in doing so. We demonstrate that these costs affect the price of...

AbstractFama and French (2006) use the dividend discount model to develop the joint role of three variables – expected profitability, expected investment and current BM – in predicting future stock returns. One reported empirical result is anomalous. The valuation model establishes that the...