We study the time-varying effects of Tobin's q and cash flow on investment dynamics in the USA using a vector autoregression model with drifting parameters and stochastic volatilities estimated via Bayesian methods. We find significant variation over time of the response of investment to shocks...

We propose a novel measure of risk perceptions: the price of volatile stocks (PVSt), defined as the book-to-market ratio of low-volatility stocks minus the book-to-market ratio of high-volatility stocks. PVSt is high when perceived risk directly measured from surveys and option prices is low....

Emerging market interest rate spreads display substantial time-varying volatility. We show that a baseline model with endogenous sovereign default risk can account for such volatility, even in the absence of shocks to the second moments of the exogenous stochastic variables. In particular, the...

Emerging market interest rate spreads display substantial time-varying volatility. We show that a baseline model with endogenous sovereign default risk can account for such volatility, even in the absence of shocks to the second moments of the exogenous stochastic variables. In particular, the...

Low cash flow volatility firms receive stronger signals about future cash flow from a given cash flow shock, yielding a larger drop in demand for external finance and their cost of external finance, implying higher investment-cash flow sensitivities (ICFS). Empirical analysis in 6 European...

We conduct a detailed empirical study of the effects of cash flow volatility on corporate bond yield spreads. Using a lengthy sample of transaction prices for investment grade straight bonds, we show that cash flow risk has strong statistical significance and economic effects on spreads, after...

We study how debt market frictions that constrain the ability of firms to buffer a tightening in bank credit supply affect corporate yield spreads. We focus on the frictions driven by the regional availability of debt financing. We provide evidence of a strong regional segmentation in the debt...

The term structure of equity return volatility fluctuates across time. It affects the term structure of equity returns through the volatility feedback effect and explains the cyclicality of equity return term structure. By analysing the dividend strip futures, this paper finds that volatility...