Mispricing and risk have both been suggested as explanations for the cross-sectional relation between stock returns and firm characteristics such as accruals. As emphasized by Ferson and Harvey (1998) and Berk, Green and Naik (1999), it is difficult to evaluate these competing explanations...

We provide a review of macro-finance models featuring nonlinear dynamics. We survey the models developed recently in the literature, including models with amplification effects of financial constraints, models with households' leverage constraints, and models with financial networks. We also...

As financial markets transition from the London Interbank Offered Rate (Libor) to alternative benchmark rates, lenders in floating rate debt lose the hedging benefits provided by Libor because the alternative reference rates are credit-insensitive overnight rates. Comparing the yield spreads of...

We investigate the association between bond returns and 32 financial statement variables. Our findings show that 17 of the 32 financial statement measures we examine are significantly related to future bond returns. Evidence of inefficiency is more pronounced when institutional investors are...

Using a large sample of business groups from more than one hundred countries around the world, we show that group information matters for parent and subsidiary default prediction. Group firms may support each other when in financial distress. Potential group support represents an off-balance...

We model and estimate the term structure of implied costs of equity capital (and implied risk premia) at the firm level for the years 1996-2015 from forward looking option contracts. Empirical tests reject the assumption that the term structure of implied firm-level costs of equity is constant...

We examine the impact of earnings management uncertainty (EMU) on bond yield spreads in China. In the process, we decompose the bond yield spread into liquidity and default yield spreads. The findings suggest that EMU primarily drives the default yield spread of a corporate bond and that its...

This paper shows how the outputs of the accounting measurement process can be translated into terms that can be used in economic decisions. We introduce the notion of Term Structure of Capital Values (TSCV), uniquely associated to a Term Structure of Interest Rates (TSIR). We show that the state...

We document that historical patterns of accruals seasonality predict future stock returns. Firms with historically larger accruals in a given quarter of the year earn lower stock returns when those accruals are expected to be announced. The accruals seasonality spread is significant only in the...

In this study we forecast the term structure of FIBOR/EURIBOR swap rates by means of recursive vector autoregressive (VAR) models. In advance, a principal components analysis (PCA) is adopted to reduce the dimensionality of the term structure. To evaluate ex-ante forecasting performance for...