This study sheds new light on the question of whether or not sentiment surveys, and the expectations derived from them, are relevant to forecasting economic growth and stock returns, and whether they contain information that is orthogonal to macroeconomic and financial data. I examine 16...

I build a dynamic capital structure model that demonstrates how business-cycle variations in expected growth rates, economic uncertainty, and risk premia influence firms' financing and default policies. Countercyclical fluctuations in risk prices, default probabilities, and default losses arise...

Since the early 2000s liquidity in option markets has become less resilient, and our evidence suggests that it is so because of an increased vulnerability to liquidity shocks in the underlying. To demonstrate the causal impact, we consider an incident in which a large broker dealer erroneously...

We propose a unified explanation for two seemingly disparate empirical findings: the negative abnormal returns of distressed stocks, and of small growth stocks. Based on a counterintuitive result relating option prices to jump risk (Merton 76), we show via an investment valuation model that...

We propose a unified explanation for two seemingly disparate empirical findings: the negative abnormal returns of distressed stocks, and of small growth stocks. Based on a counterintuitive result relating option prices to jump risk (Merton (1976)), we show via an investment valuation model that...

This paper shows that firm growth potential – representing a firm's yet-unexercised growth opportunities – is associated with option overpricing and low future delta-hedged option returns. We provide an explanation of this phenomenon based on the idea that retail investors exert buying...

We derive an option-pricing formula from recursive preference and estimate rare disaster probability. The new options-pricing formula applies to far-out-of-the money put options on the stock market when disaster risk dominates, the size distribution of disasters follows a power law, and the...

Ex ante (expected) average equity market correlation is linked to the differential correlation dynamics of growth and value firms, as well as the value premium. It predicts returns on the value factor, returns of growth firms, and the changes in growth options within an economy for horizons up...

This paper examines the relationship between financial sector reforms and sustainable economic growth in Ghana. Employing the autoregressive distributed lag (ARDL) bounds testing approach and using GDP per capita as a growth indicator, this paper establishes a long-run relationship between...

Owing to the significant role of financial sector reforms in economic growth, several studies have examined its transmission channels. This paper focuses on the stock market channel by investigating the impact of financial sector reforms on stock market growth in Ghana from 1990 to 2019. A...