This paper investigates the relationship among a firm's managerial incentive scheme, the market liquidity of its shares, and its investment policy. It shows that the shareholders' concern about the effectiveness of stock-based compensation can lead to an overinvestment problem. However, unlike...

Economists have long been puzzled by the tendency of investors to sell winning investments too soon and hold losing investments too long. Several behavioral explanations for this phenomenon, known as the disposition effect, have been advanced. This paper demonstrates that disposition effects are...

We study a model in which an issuer can manipulate information obtained by a credit rating agency (CRA). Better CRA screening reduces the likelihood of a high rating, but increases the value of a rated security. We find that improving the prior quality of assets can have no effect on the quality...

We show that firms may benefit from allowing some earnings management, because it can make noisy signals more informative. We model a firm that cannot observe a manager's cost of effort, her effort choice, and whether she manipulated a publicly observable signal. An optimal contract links...

The widespread use of accounting information by investors and financial analysts to help value stocks creates an incentive for managers to manipulate earnings in an attempt to influence short-term stock price performance. This paper examines the role of earnings management in affecting a firm's...

This paper compares the quality of commonly used predictors for the volatility of stock returns. The techniques studied are moving averages of squared returns, GARCH and stochastic volatility models, and the implied volatility. We use a variety of econometric criteria to assess the forecasting...

We propose and analyze an equilibrium model of money management in which the asset allocation decisions of money managers affect the production decisions of firms. The model produces two main results. First, comparing the performance of money managers to that of the overall market portfolio...

In the first chapter of my dissertation I study the costs and benefits of resource allocation by firms and by markets. When a firm forms a market closes. Resources that were previously allocated via the price system are now allocated by managerial authority. We explore the choice of...