This paper presents a dynamic asset-pricing model under asymmetric information. Investors have different information concerning the future growth rate of dividends. They rationally extract information from prices as well as dividends and maximize their expected utility. The model has a closed-form solution to the rational expectations equilibrium. We find that existence of uninformed investors ...

This paper explores the effect of asymmetric information and entrepreneurial risk aversion on the dynamics of a small open economy. A private equity premium arises from the optimal contract between a domestic risk-averse borrower and a foreign lender, which, in general equilibrium, helps magnify the effect of shocks over time. In terms of an exchange rate regime comparison, when entrepreneurial...

Only 5.5 percent of black males married white females in 1990, and the family-income premium for intermarried black males was 7 percent. This paper estimates the impact of the mating taboo, courting opportunities, and individual endowments on the black male marriage market. Results indicate that eliminating the mating taboo would raise the intermarriage rate from 5.5 to 64 percent, and do away ...

Under rational expectations and risk neutrality the linear projection of exchange rate change on the forward premium has a unit coefficient. However, empirical estimates of this coefficient are significantly less than one and often negative. We investigate whether replacing rational expectations by discounted least squares (or “perpetual”) learning can explain the result. We calculate the asymp...

This paper demonstrates the importance of allowing for regime switching when investigating the behavior of the parallel market premium. Regime switching techniques are used to examine the credibility of a ...xed exchange regime in economies with widespread parallel markets for foreign currency. Markov regime switching techniques used in this paper were developed in Hamilton (1989), Gray (1996) ...

the purpose of this research is investigation of application of the arbitrage pricing theory and effect of unanticipated changes in a set of macroeconomic variables such as inflation rate, money supply, exchange rate, oil price, term structure and industrial production on expected security return in tehran stock exchange. in this research, data are analyzed quarterly for the period of 1997-2008...

The risk premium is a function of both the interest rate differential and the gap between the current exchange rate and its long-run equilibrium in a model of the foreign exchange market with both non-speculating traders and rational speculators. If the speculators have an alternative to specializing in exchange-rate speculation, then there should be no presumption that uncovered interest parit...

A risk model of a joint business (insurer/re-insurer) is studied in the Large Deviations (LD) regime. In the model considered, the premium paid by the insurer to the re-insurer changes if the insurer’s capital falls below a certain level P . An optimal premium arrangement for the both business participants is investigated. By a proper choice of parameters involved, it is possible to increase th...

We show that reaching for yield—a tendency to take more risk when the real interest rate declines while premium remains constant—results from imposing a sustainable spending constraint on an otherwise standard infinitely lived investor with power utility. When is initially low, yield intensifies. The also affects response of risk-taking change in premium, which can even sign. In variant model w...