Despite increasing criticism by economists and forecasters of the ability of the stock market to predict economic recessions, it is shown that 38 of the 41 measured recessions since 1802 have been preceded by an eight percent decline in the stock returns index. There have been twelve "false...

This paper traces the evolution of the concept of "mortgage yield", starting with the yield to prepayment which held sway until the mid-seventies, to the cash flow yield which dominated until the late eighties, to the option adjusted yield which is intellectually dominant today. It is argued...

This paper presents a simple model that provides insights about various measures of portfolio performance. The model explores three criticisms of these measures: (i) the inability to identify an appropriate benchmark portfolio; (ii) the possibility of overestimating risk because of market timing...

The usual approach to determine if market prices of uninsured bank liabilities reflect the risk of default is to regress the yield spread of bank debt against accounting measures of bank risk. To date these results have been mixed. Here we argue that this is because previous investigations lack...