As highlighted by recent literature, long-term foreign exchange risk premia (FRP) of a currency pair tend to covary negatively with short-term real interest rates differentials (RIRD) of the pair. We fit an affine term structure model for 9 major currencies against the US dollar and estimate two...

The theory of ε-contamination utility builds upon the intuition that decision makers pay extra attention to the worst outcome and overweight its occurrence. Thus, the theory is highly relevant to applied research involving downside risk. The existing theory, however, assumes utility to be...

Utilizing unique features of chonsei housing contracts popular in South Korea, we conduct a new test of the presence of credit constraints. We extend a theory to characterize the impact on nondurable and durable consumption of a liquidity reduction arising from chonsei deposit increases. The...

When the number of assets (N) exceeds the number of time periods (T), the sample co-variance matrix is singular, and the portfolio optimization problem cannot be solved via traditional mean-variance algebra. In such a case, the Moore–Penrose (MP) generalized inverse becomes handy: In this...

When a developed-market investor buys emerging-market stocks, this investor may be justified not to hedge currency risk. Our analysis indicates that completely unhedged portfolios often perform better than fully hedged portfolios and are not significantly inferior to optimally hedged portfolios....

Maximum drawdown refers to the largest cumulative loss of a portfolio within a given time interval. While it has been used by investment professionals as an important measure of portfolio risk for many years, its nature and its implications for asset pricing have not been well understood. The...

With the advancement of medical sciences, knowledge transfer will become easier and cheaper. It may alter the way we traditionally think about relative wages. In this paper, we formalize this process with a labor model in which the cost of knowledge transfer and preferences over occupation are...