How do investors respond to predictable shifts in profitability? We consider how demographic shifts affect profits and returns across industries. Cohort size fluctuations produce forecastable demand changes for age-sensitive sectors, such as toys, bicycles, beer, life insurance, and nursing...

In this paper, we examine an exchange economy with a financial market composed of three assets: shares of a stock, European call options written on the stock, and riskless bonds. The financial market is assumed to be incomplete and the option is not a redundant asset. In such a case the...

We are interested in the effect of capital income taxes upon security prices when investors face locally segmented stock markets and a global bond market. Therefore, we analyze an equilibrium model of an economy with binomial uncertainty, an exogenous risk-free interest rate, and a...

We explore the role of corporate insiders vs. firms as traders of last resort. We develop a simple model of insider trading in which insiders provide price support, as well as liquidity, in security markets. Consistent with the model predictions we find that in the US markets insiders’ trading...

The gradual shift to market related rates of interest on government borrowing has now made it possible to estimate the term structure in the Indian debt markets. Estimates of term structure provide the basis for valuation and risk measurement of sovereign and non-sovereign securities. It gives...

The objective of this paper is twofold: (1) to analyze an optimal portfolio rebalancing by a fund manager in response to a "volatility shock" in one of the asset markets, under sufficiently realistic assumptions about the fund manager's performance criteria and portfolio restrictions; and (2) to...

We propose new approaches to test for spanning in the return and stochastic discount factor mean-variance frontiers, which assess if either the centred or uncentred mean and cost representing portfolios are shared by the initial and extended sets of assets. We show that our proposed tests are...

This paper advances a simple model that emphasizes the diversity of capital types, some of these types are long lived, while others are highly specific. This modeling of capital implies that irreversibility constraints may be strongly binding, thus generating sizable capital losses, even with...

We investigate the consequences for value-at-risk and expected short-fall purposes of using a GARCH filter on various mis-specified processes. We show that careful investigation of the adequacy of the GARCH filter is necessary since under mis-specifications a GARCH filter appears to do more harm...