Issues in the construction of corporate bond event studies using bond transaction data are explored. We show that the procedures used in studies to date have relatively low power because they fail to control for the substantial heteroskedasticity in bond returns due to differences in...

Using a unique proprietary data set of positions held by all large traders in the crude oil, gasoline, and heating oil futures markets, we use actual trader profits to test the predictions of various commodity futures pricing models. We find statistically and economically significant evidence...

There is information asymmetry between the seller andbuyer about the quality of comic books offered on eBay online auctions. Thisstudy examines the different signaling strategies that sellers use to remedythe information asymmetry. Four types of common signals are considered: thirdparty...

Utilizing monthly aggregate flow data for U.S. equity mutual funds over 1986-2008, we document several new findings on investor behavior. First, we find a strong negative relationship between changes in expected market volatility as measured by the VIX index and net equity fund flows. Second, we...

By Jensen's inequality, a model's forecasts of the variance and standard deviation of returns cannot both be unbiased. This paper explores the bias in GARCH type model forecasts of the standard deviation of returns, which we argue is the more appropriate volatility measure for most financial...

This paper explores differences in the impact of equally large positive and negative surprise return shocks in the aggregate U.S. stock market on: 1) the volatility predictions of asymmetric time series models, 2) implied volatility, and 3) realized volatility. Both asymmetric time series models...

For short, long, and medium term interest rates, we explore the extent to which future interest rate volatility is predictable based on: 1) recent past volatility, 2) knowledge of when the FOMC will meet, when Treasury auctions will take place, and when important macroeconomic statistics will be...

Option pricing models and longer-term value-at-risk models typically require volatility forecasts over horizons considerably longer than the data frequency. These are generally generated from short-horizon forecasts by successive forward substitution. We document deficiencies with the resulting...

Ratio spreads in which a trader buys calls (or puts) at one strike and sells an unequal number of calls at a different strike are among the most actively traded option combinations yet are only briefly mentioned in most derivatives texts and have received no attention in the research literature....

In many markets, changes in the spot price are partially predictable. We show that when this is the case: 1) although unbiased, traditional regression estimates of the minimum variance hedge ratio are inefficient, 2) estimates of the riskiness of both hedged and unhedged positions are biased...