Using monthly stock-market data covering 1871-2020, this paper analyzes how the P-E ratio is related with the future stock-market performance and whether mispricing produces opportunities to time the stock market. The P-E ratio is found to be inversely related with the future stock market...

This paper examines the effects of the estimated probability of bank failure on the growth rates of large time deposits and interest rates on those deposits. While riskier banks paid higher interest rates, they attracted less large time deposits in the second half of the 1980s. These results...

This paper recognizes two main factors that cause the capital requirement to affect the weighted average cost of capital and hence the investment behavior of banks: underpriced debt resulting from the deposit insurance and information asymmetry between managers and the stock market. For a bank...

An option is embedded in credit cards. Since credit cards offer open credit lines, cardholders can borrow at the same terms when they become riskier. This option value raises the zero-profit card rate. Furthermore, adverse selection occurs if cardholders are better informed about the probability...

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 limited thrift goodwill that could be counted as regulatory capital. This paper infers the significance of the thrift put option value from the relationship between thrift goodwill and stock returns. The ability to count...

This paper derives conditions under which concerns about relative income produce rational herding--the shift of individuals' portfolios into the same direction as others'. To endure the generality of results, the model makes parsimonious behavioral assumptions and no assumption about the...

Using US data covering from 1959 to 1994, we examine the consistency of aggregate consumer borrowing with the permanent income/life-cycle hypothesis (PI/LCH) and the predictive power of consumer borrowing. The PI/LCH implies that consumer borrowing should be an increasing function of the gap...