Interest rates have a considerable bearing on share prices. Any investor's experience shows that, in general, when interest rates fall significantly, share prices rise, and vice-versa. We begin by observing the evolution of interest rates in the last 22 years in the United States. We also look...

Lack of shareholders' commitment about debt and investment policies increases the cost of debt by a quantity that we refer to as the agency (credit) spread. The agency spread increases with the number of periods for which debt holders are exposed to policies that decrease the value of debt: from...

Previous studies show that firms with low inventory growth outperform firms with high inventory growth in the cross-section of publicly traded firms. In addition, inventory investment is volatile and procyclical, and inventory-to-sales is persistent and countercyclical. We embed an inventory...

A standard assumption of structural models of default is that firms' assets evolve exogenously. In this paper, we examine the importance of accounting for investment options in models of credit risk. In the presence of financing and investment frictions, fi rm-level variables that proxy for...

In the inverted yield curve environment, whether the sixteen SDGs set up by the United Nations could be realized by 2030 sparks interesting considerations. Meanwhile, as the Reserve Bank of New Zealand is considering the potential issuance of the CBDC, the boost to SDG 8 - decent work and...

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...

The yield to maturity (YTM) or internal rate of return (IRR) is a metric used in financial analysis to estimate the profitability of potential investments. Almost all finance textbooks state the following conditioning assumptions: (i) that the coupon payments can be reinvested at a rate equal to...

The yield to maturity (YTM) or internal rate of return (IRR) is a metric used in financial analysis to estimate the profitability of potential investments. Almost all finance textbooks state the following conditioning assumptions:(i) that the coupon payments can be reinvested at a rate equal to...

Previous empirical work suggests that, when using corporate bond indices, the yield spread sensitivity of corporate bonds to changes in the yield curve is negative and significant, especially for the A and BBB-rated bond categories. We use a sample of 5500 US corporate bonds to construct bond...

Although the effects of economic news announcements on asset prices are well established, theserelationships are unlikely to be stable. This paper documents the time variation in the responses of yield curves and exchange rates using high-frequency data from January 2000 through August 2011....