We derive the optimal portfolio for an investor with increasing relative risk aversion in a complete continuous-time securities market. The IRRA assumption helps to mitigate the criticism of constant relative risk aversion that it implies an unreasonably large aversion to large gambles, given...

In a Kyle (1985) model, the sign of the correlation between a firm's debt and equity returns is the same as the sign of the cross-market Kyle's lambda. The sign is positive (negative) if private information concerns the mean (risk) of the firm's assets. We show empirically that information...