This paper examines the investment strategies of regulated companies in abatement technologies,market participants' trading behaviors, and the liquidity level in an inter-temporalcap{and{trade market using laboratory experiments. The experimental analysis is performedunder varying market...

This paper summarizes the short selling restrictions adopted—mainly on anemergency basis—in the time period of July 2008 up to mid-June 2010 in 56countries around the world. It is a supplement to a recent article of theauthors (Gruenewald et al., 2010) and gives a detailed overview of...

The paper rst shows that nancial market equilibria need not to exist if agents possesscumulative prospect theory preferences with piecewise-power value functions. This is due tothe boundary behavior of the cumulative prospect theory value function, which might causean innite short-selling...

We explore the pricing of variance risk by decomposing stocks' total variance into systematicand idiosyncratic return variances. While systematic variance risk exhibits a negative priceof risk, common shocks to the variances of idiosyncratic returns carry a large positive riskpremium. This...

Assuming investors are loss averse, repeated risky investments are less attractive inmyopic evaluation. A theoretical foundation for this effect is given by the behavioralconcept of myopic loss aversion (MLA). The consequences of MLA have been confirmedin several between-subject experimental...

We investigate the suitability of securitization as an alternative to reinsurance forthe purpose of transferring natural catastrophe risk. We characterize the conditionsunder which one or the other form of risk transfer dominates using a setting in whichreinsurers and traders in financial...

A common method of valuing the equity in leveraged transactions is the flows-to-equity method whereby the free cash flow available to equity holders is discounted at the cost of equity. This method uses a standard definition of equity free cash flow, but the cost of equity varies over time as...

Using a unique dataset containing separate information on the base andbonus pay of over a million workers, we provide novel evidence on the determinantsand earnings effects of performance pay. Several observables—in particularage, education, tenure, and job complexity—have a large impact on...

This paper presents an equilibrium model that provides a rational explanation for twofeatures of data that have been considered puzzling: The positive relation between USdividend yields and nominal interest rates, often called the Fed-model, and the time-varying correlation of US stock and bond...

On financial markets many investment decisions are taken by groups and not by individuals. The evidence, however, whether groups better than individuals, is ambigous. We analyze the portfolios of groups and individuals in an asset allocation task on an experimental market. We find that groups on...