Generalizing Cooper-Kaplanis (1994), we estimate implied costs that reconcile international portfolios with InCAPM predictions. Costs depend on home- and host-country characteristics and on interactions; we estimate risk tolerance rather than pre-specifying it; and we control for currency risk,...

Regressions often use pre-orthogonalized regressors: prior to the main regression, an independent variable xi is regressed upon the other regressor(s), and its residuals are used in the right-hand side of the main regression instead of the raw variable itself. For example, the exposure of a...

The martingale hypothesis for futures prices is investigated using a nonparametric approach where it is assumed that the expected futures returns depend (nonparametrically) on a linear combination of predictors. We first collapse the predictors into a single‐index variable where the weights...

To explain convenience yield accruing to commodity inventory holders, time to maturity (TTM) and TIME to harvest should interact with current scarcity. Using weekly data for corn, wheat and soyabeans (1986–2009), the interaction (multiplicative) model performs better than traditional versions...

Does one make money trading on the deviations between observed bond prices and values proposed by bond-pricing models? We extend <link rid="b34">Sercu and Wu's (1997)</link> work to more models and more data, but we especially refine the methodology. In particular, we provide a normal-return benchmark that markedly...

Facts vs Fantasies about the ECU. Advantages frequently ascribed to the ECU include the following:

Typically, international capital budgeting is carried out using the adjusted net present value (NPV) approach. In this article, we present an alternate method for valuing international investments; one that is based on the option pricing theory developed by Black and Scholes (1973). We show that...