It appears that volatility in equity markets is asymmetric: returns and conditional volatility are negatively correlated. We provide a unified framework to simultaneously investigate asymmetric volatility at the firm and the market level and to examine two potential explanations of the...

Using a novel information asymmetry index based on measures of adverse selection developed by the market microstructure literature, we test if information asymmetry is an important determinant of capital structure decisions, as suggested by the pecking order theory. Our index relies exclusively...

We construct an index of firms' external finance constraints via generalized method of moments (GMM) estimation of an investment Euler equation. Unlike the commonly used KZ index, ours is consistent with firm characteristics associated with external finance constraints. Constrained firms'...

Despite the debate on the pricing of idiosyncratic risk, it is generally believed that the pricing effect is likely to exist among small stocks due to lack of diversification and information asymmetry predicted by Merton (1987). However, given the size of Asset Under Management, most...

It appears that volatility in equity markets is asymmetric: returns and conditional volatility are negatively correlated. We provide a unified framework to simultaneously investigate asymmetric volatility at the firm and the market level and to examine two potential explanations of the...

Volatility in equity markets is asymmetric: contemporaneous return and conditional return volatility are negatively correlated. In this paper we develop an asymmetric volatility model where dividend growth and dividend volatility are the two state variables of the economy. The model allows both...

This paper studies the set of links between a behavioral bias, transitory price movements, and the rational response to the bias. We show that attention-grabbing events lead active individual investors to consider and ultimately buy stocks they have not previously owned. Not all...

We conduct an empirical investigation of an emerging strand of models, pioneered by Berk, Green and Naik (1999), relating firms' real investment behavior under investment irreversibility and asset return dynamics. The models in this literature share many of the same predictions. We first extend...