Do financial markets properly reflect leverage? Unlike Gomes and Schmid (2010) who examine this question with a structural approach (using long-term monthly stock characteristics), my paper examines it with a quasi-experimental approach (using short-term a discrete event). After a firm has...

As to the equity premium, the 2008 decline in the stock market has made economists mildly more bullish about future stock market rates of return. Typical expected equity premia are between 5% and 6% per year.As to policy, the recommended fiscal stimulus is around $700 billion. A large majority...

Suggests a model to explain underpricing at the IPO by high-quality firms as a signal to investors at the expense of low-quality firms. In contrast to Rock's (1986) equilibrium model suggesting firms underprice reluctantly, this model follows in the vein of more recent models (Nanda 1989 and...

Standard deviations and market-betas based on winsorized rates of return predict their own future realizations better than equivalents based on unwinsorized rates of returns. A good prescription is to winsorize rates of return around plus and minus 10- 15%, especially for samples of all CRSP...