The ad hoc Black-Scholes (AHBS) model is one of the most widely used option valuation models among practitioners models. The main contribution of this study is methodological. We have two main results: (1) we make the empirical observation that typically the call and put sneers are discontinuous...

To study the welfare effects of investment barriers and the opening of markets to foreigners, we construct an equilibrium model of international asset pricing without agency costs that allows endogenous market participation among heterogeneous agents. Equilibrium prices and the set of...

We present evidence of significant bias in event studies that investigate the effect of U.S. monetary policy on U.S. stock prices. To overcome this bias, we propose a new identification method based on the "Impossible Trinity" theory which argues that an economy with a fixed exchange rate and...

This study investigates the ability of market beta, book-to-market equity, leverage, and earnings-price ratio to explain the cross-sectional variation in expected returns in the stock market of Sri Lanka. The sample of the study consists of a total of 88 companies which are listed on the Colombo...

We explore the link between firms' dollar bond borrowing and their FX-hedged funding opportunities, as reflected in a positive corporate basis (the relative cost of local to synthetic currency borrowing). Consistent with previous research, we first document that firms substitute domestic for...

We explore the link between firms' dollar bond borrowing and their FX-hedged funding opportunities, as reflected in a positive corporate basis (the relative cost of local to synthetic currency borrowing). Consistent with previous research, we first document that firms substitute domestic for...

In order to explain cross-country differences in the effects of capital market liberalization, this paper proposes a model of international asset markets in which investors in different countries each face constraints on portfolio choice. The model demonstrates that liberalization, i.e. the...

We analyze the effects that real-time domestic and foreign news about fundamentals have on the co-movement between stock returns of a small, open economy, Portugal, and a large economy, the United States. Studying co-movement between the US and a small, open economy helps overcome significant...

Despite the liberalization of international capital flows during the last decades, typical investors continue to hold most of their wealth in domestic assets. International RBC models can explain that 'portfolio home bias', if consumption home bias is incorporated, i.e. the fact that the bulk of...

Existing studies using low-frequency data have found that macroeconomic shocks contribute little to international stock market covariation. However, these papers have not accounted for the presence of asymmetric information where sophisticated investors generate private information about the...