Many important classes of assets are illiquid in the sense that they cannot always be traded immediately. Thus, a portfolio position in these types of illiquid investments becomes at least temporarily irreversible. We study the asset-pricing implications of illiquidity in a two-asset exchange...

We present a simulation-based method for solving realistic portfolio choice problems that potentially involve non-standard preferences and a large number of assets with arbitrary return distribution. Specifically, the return distribution can be time-varying as a function of many observable or...

vThe consumption asset pricing framework implies that asset prices may be used to investigate the properties of consumption. An important property of consumption is its elasticity of intertemporal substitution which measures the willingness of individuals to move consumption between time periods...

Changes in the risk premium are postulated to be related to changes in the distribution of wealth across nations induced by the exchange rate. The model is empirically supported for six out of nine currencies. For the other currencies, the results are as expected, but insignificance inhibits...

Price clustering in initial public offerings (IPOs) is extreme, pervasive, and long-lived. In a 25 year sample of 7,805 IPOs, offering prices range form one tenth cent to $5,000 per share. However, the price frequency distribution yields a clear triple peak with three discrete values, $5, 10,...

We use the information in credit-default swaps to obtain direct measures of the size of the default and nondefault components in corporate spreads. We find that the majority of the corporate spread is due to default risk. This result holds for all rating categories and is robust to the...

We consider the problem of motivating privately informed managers to engage in entrepreneurial activity to improve the quality of the firm's investment opportunities. The firm's investment and compensation policy must balance the manager's incentives to provide entrepreneurial effort and to...

In theory, an investor can make infinite profits by taking unlimited positions in an arbitrage. In reality, however, investors must satisfy margin requirements which completely change the economics of arbitrage. We derive the optimal investment policy for a risk-averse investor in a market where...