Recent work has suggested that strategic under performance of debt service obligations by equity holders can resolve the gap between observed yield spreads and those generated Merton (41) style models. We show that it is not quite correct. The value of the option to under perform on debt-service...

We investigate the effects of short sale constraints on asset mispricing in the corporate bond market. Consistent with Miller (1977)'s theory that short sale constraints can lead to asset overpricing, we document a significant positive relation between changes in ownership breadth (a proxy for...

There is no consensus on whether macroeconomic fundamentals have any predictive power for bond risk premia, either unconditionally or conditionally over bond yields. Using Adaptive Group LASSO, a machine learning algorithm, we are able to construct a new, parsimonious macro variable that is...

We document a strong low-price effect for Chinese initial public offerings (IPOs). Namely, IPOs with low offer prices have higher initial returns, followed by even stronger after-market performance. This low-price effect cannot be fully explained by risks and IPO undervaluation. A long-only...

This paper tests the technical trading rule of moving average (MA) in a long-only portfolio using exchange traded funds (ETFs). We also propose a quasi-intraday version of the MA strategy (QUIMA) that allows investors to trade immediately upon observing MA crossover signals. We find that 1) this...

We construct a theoretical framework to investigate the impact of liquidity risk, in the secondary corporate debt market, on corporate risk-taking preferences. Using closed-form solutions, our model shows that equity holders choose to adopt high-risk projects upon the arrival of illiquidity...

quot;Inflation-indexed securities would appear to be the most direct source of information about inflation expectations and real interest ratesquot; (Bernanke, 2004). In this paper we study the term structure of real interest rates, expected inflation and inflation risk premia using data on...

quot;Inflation-indexed securities would appear to be the most direct source of information about inflation expectations and real interest rates.quot; (Bernanke, 2004). In this paper we study the term structure of real interest rates, expected inflation, and inflation risk premia using data on...

This paper estimates inflation risk premia using data on prices of Treasury Inflation Protected Securities (TIPS) over the period 2000-2008. The estimation approach used is arbitrage free, largely model free, and easy to implement. It also distinguishes between TIPS yields and real yields by...

Empirical studies of structural credit risk models so far are often based on calibration, rolling estimation, or regressions. This paper proposes a GMM-based method that allows us to both consistently estimate the model parameters and test whether all the restrictions of the model are satisfied....