Although examples of deception and fraud in business have generated widespread interest in themotivations for honest behavior, little is known about individual differences in the propensity totell the truth. This paper highlights the role of honesty as a protected value, maintaining thatsome...

A large literature studies the predictability of stock returns by other lagged nancialvariables in a predictive regression setting. A common feature of widely used testingprocedures is a failing robustness, which may lead to misleading conclusions determinedby the particular features of a small...

We introduce a new class of flexible and tractable matrix a±ne jump-diffusions (AJD) to modelmultivariate sources of financial risk. We first provide a complete transform analysis of this model class,which opens a range of new potential applications to, e.g., multivariate option pricing with...

This paper analyzes the relation between correlation risk and the cross-section of hedge fund returns.Legal framework and investment mandate imply that hedge funds can be severely exposed tocorrelation risk: Hedge funds ability to enter long-short positions can be useful to reduce marketbeta,...

This paper examines the role of bond ratings and the effects of rating-based regulations in thecorporate bond market. Exploiting an unanticipated mechanical change in how the benchmarkLehman bond indices are constructed in 2005, we show that rating-induced market segmentationof the bond market...

The well-known absence-of-arbitrage condition NFLVR from the fundamentaltheorem of asset pricing splits into two conditions, called NA and NUPBR.We give a literature overview of several equivalent reformulations of NUPBR;these include existence of a growth-optimal portfolio, existence of the...

This paper develops a model of corporate investment and financing decisions thatdiffers from previous contributions by recognizing that firms face uncertainty regardingtheir future access to credit markets and may have to search for creditors when raisingdebt financing. We show that accounting...

This paper studies the effects of investors’ heterogeneous beliefs on the trading volume,price volatility, and liquidity of stocks. Following Kurz and Motolese (2008), wepropose a simple theoretical model to show that the equilibrium stock price is linearlyand positively correlated with market...

This paper deals with asymptotically efficient estimation in exchangeable nonlinear dynamicpanel models with common unobservable factor. These models are especially relevantfor applications to large portfolios of credits, corporate bonds, or life insurance contracts, andare recommended in the...

The recursive prediction and filtering formulas of the Kalman filter are difficult to implementin nonlinear state space models. For Gaussian linear state space models, or for models with qualitativestate variables, the recursive formulas of the filter require the updating of a finite number...