Empirical research indicates that distributed lag specifications perform well in describing aggregate investment. Such specifications are typically rationalized through the assumption of convex adjustment costs that imply smooth partial adjustment of capital. However, much of the capital stock...

We test for the pricing of exchange rate and foreign inflation risk in equities. Our tests are motivated by the empirical implications of the models of Solnik (1974b) as revised by Sercu (1980), Grauer, Litzenberger, and Stehle (1976), and Adler and Dumas (1983). Both exchange rate and foreign...