Procedures are presented that allow the empiricist to estimate and test asset pricing models on limited-liability securities without the assumption that the historical payoff distribution provides a consistent estimate of the market’s prior beliefs. The procedures effectively filter return data for unspecified historical biases in the market’s priors. They do not involve explicit estimation of ...

This study examines the disclosure of labor-related costs by US firms, and estimates the proportion of these costs that are valued as an asset (human capital) by the market. Separate identification of labor-related costs in US financial reports is voluntary, and is made consistently only by about 10% of all US Compustat firms. The probability of disclosure is found to be positively related to f...

In this paper we investigate the presence of the following asset pricing anomalies viz. size, value, momentum, liquidity, accruals, profitability and net stock issues in India. Size effect is the strongest with a difference of 4.4 % per month between small and big stock returns. A positive relationship is reported between accruals, stock issues and returns and a negative relation between profit...

The real options approach to corporate investment decision making recognizes a firm can delay an investment decision and wait for more information concerning project cash-flows. The well known models of McDonald and Siegel (1986) and Dixit and Pindyck (1994) value the investment decision as a perpetual American call option on the project value. The former specifies the equilibrium return via CA...

Is there any point to which you would wish to draw my attention?” “To the curious incident of the investment in the market.” “The agent did nothing in the market.” “That was the curious incident.” (with apologies to Sir Arthur Conan-Doyle.) In this paper we study an optimal timing problem for the sale of a non-traded real asset. We solve this problem for a utility maximizing, risk averse manage...

This study adopts derivative pricing as an indicator of market expectations, with those results suggesting that general investors can use market expectations to predict the final settlement value of underlying assets. Most investment textbooks note that one of the major functions of futures is price discovery. Similarly, the implied volatility associated with option prices can be used to discov...

In this paper we study the effect of induced positive mood on price patterns in experimental asset markets. Smith, Suchanek and Williams (1988) in their seminal paper documented bubbles and crashes in experimental asset markets (i.e., prices exceed fundamental value in the beginning and fall towards or below the fundamental value towards the end of the market). Since then, a number of studies h...

Customized electric power contracts catering to specific business and risk management needs have gained increasing popularity among large energy firms in the restructured electricity industry. A tolling agreement (or, tolling contact) is one such example in which a contract buyer reserves the right to take the output of an underlying electricity generation asset by paying a predetermined premiu...

We consider a dynamic asset pricing model with one asset, in which one informed trader trades against liquidity traders and competitive market makers. Informed trader has private information about the fundamental value of the asset as well as the exogenous demand shock on the market. We characterize the unique linear Markov equilibrium of the model. With just the private information about funda...