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We provide a test of the Monday effect in daily stock index returns. Unlike previous studies we define the Monday effect based on the stochastic dominance criterion. This is a stronger criterion than those based on comparing means used in previous work and has a well defined economic meaning. We...

We develop a dynamic stochastic equilibrium model of two locations within a city where heterogeneous households make joint location and tenure mode decisions. To investigate the effect of homeownership on equilibrium prices and allocations, we compare the response of this model economy to a...

We study a continuous time model of a levered firm with fixed assets generating a cash flow which fluctuates with business conditions. Since external finance is costly, the firm holds a liquid (cash) reserve to help survive periods of poor business conditions. Holding liquid assets inside the...

Executive stock options reward success but do not penalise failure. In contrast, the standard principalagent model implies that pay is normally monotonically increasing in performance. This paper shows that, under loss aversion, the use of carrots but not sticks is a feature of an optimal...

A new estimate of the long-run impact of trading activity on bid-ask spreads in the foreign exchange markets is realized with a short panel containing around-the-clock Reuters quotes and global transaction volumes. Individual and time effects are accounted for in an unbalanced random effects...

We present a model of succession in a firm controlled and managed by its founder. The founder decides between hiring a professional manager or leaving management to his heir, as well as on how much, if any, of the shares to float on the stock exchange. We assume that a professional is a better...

A positive Lyapunov exponent is one pratical definition of chaos. We develop a formal test for chaos in a noisy system based on the sign of the Lyapunov exponent. The test utilizes nonparametric regression techniques including local quadratic regression and neural networks. When our procedures...

I study an example of a coordination game, and examine the robustness of equilibrium predictions with respect to changes in the information structure. I find two main results: First, the critique of Morris and Shin (1998) is not robust in the sense that if perfect common knowledge is viewed as...

A risk-averse consumer purchases an insurance policy, if she suffers a loss, she may receive services from a provider to recover some of the loss. Only the consumer and the provider know if the loss has actually occurred. The providers behaviour is uncertain. With some positive probability, the...