In an exchange economy with recursive preferences (Epstein and Zin, 1989), we propose a novel nonparametric generalized method of moment (GMM) series approach to estimate unknown policy functions which are recursively specified in a system of nonlinear conditional expectation models...

The economic reliability of a performance metric depends on its consistency with the Net Present Value (NPV). We use the new notion of strong NPV-consistency for comparing the Straight-Line rate of return (belonging to the class of AIRR metrics) and the traditional Internal Rate of Return (IRR)....

This paper quantifies the premium demanded by the investors for bearing the corporate default risk. We propose a novel approach that exploits the information in both credit default swap (CDS) spreads and stock prices, using the pricing restrictions provided by a structural model of credit risk....

Market leverage is one of the main determinants for defining the optimal capital structure of the firm, and has a significant impact on several variables that affect the design of the firm's business strategy. This paper is focussed on the potential methodologies exploitable to obtain reliable...

Investment decisions may be evaluated via several different metrics/criteria, which are functions of a vector of value drivers. The economic significance and the reliability of a metric depend on its compatibility with the Net Present Value (NPV). Traditionally, a metric is said to be...

In this paper we investigate the commonly used autoregressive filter method of adjusting appraisal-based real estate returns to correct for the perceived biases induced in the appraisal process. Since the early work by Geltner (1989), many papers have been written on this topic but remarkably...

There is nothing like a market crash to focus the mind on the importance of risk management and, more specifically, tail risk management. Because tail events are generally systemic in nature and are characterised by elevated correlations and liquidity squeezes, effective tail risk management is...

I show that an important no-arbitrage consistent but costly collateral rental yield contributes to about two-thirds of the standard CIP violations. I measure this yield using two approaches applied to short- and long-term CIP horizons. First, I assume that the yield is observable and proxy it...

Previous research has found that high-frequency traders will vary the bid or offer price rapidly over periods of milliseconds. This is a benefit to fast traders who can time their trades with microsecond precision, however it is a cost to the average market participant due to increased trade...

This study proposes a novel nonparametric estimation approach to solving asset-pricing models. Our method is robust to misspecification errors and it inherits a closed-form solution that facilitates ease of implementation. By transforming the Euler equation, our estimate is fully identified, and...