This paper provides a set of empirical tests of the cross-sectional variation of stock volatility and investablility, where investability is defined as the degree to which a stock is accessible to foreigners. Unlike previous studies, which focus on market volatility and market return, we study the relationship between individual stock return volatility and its investablility. Our findings have ...

The probability approach to uncertainty and modeling is applied to default probability estimation. This issue has attracted attention as banks contemplate the requirements of Basel II’s IRB rules. Nicholas M. Kiefer proposes the fomal introduction of expert information into quantitative analysis. An application treating the incorporation of expert information on the default probability is consi...

In a multi-industry growth model, firms require external funds to conduct productivityenhancing R&D, and face financing constraints. The cost of research differs across industries, so that financing constraints hinder productivity growth in some industries more than in others. Equilibrium industry dynamics map into a differences-indifferences regression specification where industry growth depen...

In recent years, securitization and other ®nancial innovations have provided unprecedented opportunities for banks to reduce substantially their regulatory capital requirements with little or no corresponding reduction in their overall economic risks ± a process termed ``regulatory capital arbitrage''. These methods are used routinely to lower the e€ective risk-based capital requirements agains...

This paper proposes an unobserved fundamental component of volatility as a measure of risk. This concept of fundamental volatility may be more meaningful than the usual measures of volatility for market regulators. Fundamental volatility can be obtained using a stochastic volatility model, which allows us to `®lterÕ out the signal in the volatility information. We decompose four FTSE100 stock i...

Because of the recent surge in U.S. personal defaults, Congress is currently debating bankruptcy reform legislation requiring a means test for Chapter 7 filers. This paper explores the effects of such a reform in a model where, in contrast to previous work, bankruptcy options and production are explicitly taken into account. Our findings indicate that means testing would not improve upon curren...

This paper investigates the e¤ect of country-level …nancial development on the formation of corporate groups. Since cross-country regressions are hard to interpret in a causal sense, we use exogenous industry measures to investigate a speci…c channel through which …nancial development may a¤ect group a¢ liation: internal capital markets. Using a comprehensive …rm-level dataset on European corpo...

Taxol is a chemotherapeutic drug which acts by stabilizing microtubules, preventing normal mitosis and resulting in a block of the cell cycle at G2 and M. The drug is isolated from the yew, Taxus sp. l.., and is currently being evaluated in a series of Phase II and Phase III clinical trials. Taxol blocks cells in the most radiosensitive phases of the cell cycle and thus could act as a cell cycl...

The present paper thoroughly explores second-best efficient allocations in an adverse selection insurance economy. We start from a natural extension of the classical model, assuming less than perfect risk perceptions. We propose first and second welfare theorems, by means of which we describe efficiencyenhancing policies. Notions of weak and strong adverse selection are promising for interpreti...