This paper considers the problem of investment of capital in risky assets in adynamic capital market in continuous time. The problem addressed is the control of risk, and in particular the risk associated with errors in the estimation of returns on assets. The framework for investment risk is a...

Adopting a MS-VAR model (Krolzig, 1997) and a recently developed regime-dependent impulse response analysis technique (Ehrmann, et al., 2003), this paper investigates the dynamic relationships among the stock markets of the US, Australia and New Zealand. Our results reveal the existence of two...

In a growing economy the cash flows from investment projects can be expected to be rising over time. In this paper we explore the interactions of growth and uncertainty of cash flows with variable capital intensity in the decision to invest. We derive simple replacements for the usual...

In this paper I relate the risk premia in the stock and bond markets to the conditional volatility of returns and time-varying reward-to-volatility variables. I find that the relation between the expected returns on the stocks and bonds and the volatility of returns is time varying. I provide an...

This paper describes the background, the process, and the market reaction of Chinese crucial privatization program, namely the Non-tradable Share Issue Reform. We document the following findings: (1) The privatization program causes economically moderate and statistically significant cumulative...

We use a natural experiment occurred on Hong Kong stock market to examine the effects of removing short sales constraints on several trading characteristics of underlying stocks. We find that the trading of underlying stocks become less active after the lift of short sales constraints; meanwhile...

Using a consumption-based asset pricing model with infinite-horizon nonlinear habit formation, Campbell and Cochrane (1999) show that low consumption in surplus of habit should forecast high expected returns. This article argues that the finite-horizon linear habit model also implies an inverse...

Adopting a multivariate Markov-switching-VAR model (Krolzig, 1997) and a recently developed regime-dependent impulse response analysis technique (Ehrmann <italic>et al</italic>., 2003), this article investigates the dynamic relationships among the stock markets of the US, Australia and New Zealand. Our results...