We construct recursive solutions for, and study the properties of the dynamic equilibrium of an economy with three types of agents: (i) house-hold/investors who supply labor with a finite elasticity, consume a large variety of goods that are not perfect substitutes and trade government bonds;...

The distinction between domicile and place of business is becoming more and more relevant as a growing number of firms have activities abroad. In most statistical studies of international stock returns, a firm is included in a country’s index if its headquarters are located in that country....

Entry into a market seems to necessitate some investment into "marketing capital" (or distribution capital: advertising, dealerships etc ... ). This form of investment has the property that, if it is unused for some time, it quickly becomes worthless. When entry into a market requires marketing...

We consider a world capital market in which the investor population is heterogenous. Investors of different countries differ in the prices of goods at which they consume the income from their investments. In such a setting, the international CAPM incorporates rewards for exchange rate risk, in...

Our objective is to understand the trading strategy that would allow an investor to take advantage of "excessive" stock price volatility and "sentiment" fluctuations. We construct a general equilibrium model of sentiment. In it, there are two classes of agents and stock prices are excessively...

An exchange-rate system is a set of contracts which commits central banks to intervene in the foreign-exchange market. The design features of the system include: the rules of intervention, the limits placed on exchange rates and the "crisis scenario" which describes possible transitions to new...

We examine the expected survival time of a unilateral exchange rate target zone, when constraints on monetary policy prevent the central bank from exclusively focusing on defending the target zone. Generally, the width of the target zone has a negligible effect on the expected survival time, and...

Previous work by Dumas and Solnik (1993) has shown that a CAPM which incorporates foreign-exchange risk premia (a so-called 'international CAPM') is better capable empirically of explaining the structure of worldwide rates of return than does the classic CAPM. In the specification of that test,...