Corporate finance textbooks (e.g., Webster 2003, Chapter 12) recommend that a company invest in a project if and only if the project’s internal rate of return exceeds the cost of capital. If companies operated this way, their investment decisions would be independent across projects within the company, conditional on the projects’ cash flows being independent. In practice, such conditional inde...

Fund managers have to decide the amount of a fund’s assets that should be kept in cash, considering the tradeoff between being able to meet shareholder redemptions and minimizing the opportunity cost from lost investment opportunities. In addition, they have to consider redemptions by individuals as well as institutional investors, the current performance of the stock market and interest rates,...

This study recognizes that commercial mortgage default is not a one-step process and examines a previously unexplored aspect in the whole default process, that is the stage between the initial delinquency and default. We distinguish the servicers' behavior from the borrowers' behavior. A multinomial logit model is applied to analyze the servicers' choice of workout options and a proportional ha...

Within a general equilibrium model with habit persistence preferences and time varying expected dividend growth, we obtain a number of novel predictions about the time series of the cross section of asset prices. We show that assets of longer duration, i.e. that pay far in the future, are typically riskier than those of shorter duration. However, those assets that are characterized by a substan...

The Telecommunications Act of 1996 required that charges for interconnection, universal service and unbundled network elements should be based on cost, and directed the Federal Communications Commission to implement this legislation. The parties developed engineering process models to estimate forward-looking costs. Both the engineering economics and the cost model approaches were unsatisfactor...

This paper examines the effects of introducing and removing short sale constraints and margin requirements on a stock market using a multiagent simulation model. We focused on the influence of these kinds of restrictions on daily price volatility and on traders long-run wealth distribution. We performed analysis both in a closed market and in an open market, where there is random cash inflow or...

In this thesis, I provide new insights in the field of asset pricing and portfolio optimization by investigating the role of information and factor decompositions. In particular, I investigate the effect of disentangling specific risk factors as used in the earlier asset pricing and portfolio allocation literature into their different sub-components. In Chapter 2, I propose an extension to the ...

Last month, in this magazine, this author argued in Fixing Financial Statements: Financial Statement Overhaul that the traditional formats of the primary financial statements—income statement, balance sheet, and cash flow statement—need major redesign to again be useful for meaningful financial analysis, decision-making and value creation. Since the fundamental objective of a business is to inc...

Credit-card issuers in the United States have begun to explore the idea of introducing electronic-cash products. Seven financial giants, including Wells Fargo, Chase Manhattan, and MasterCard, have agreed to market the Mondex electronic cash product in the United States.1 VISA is developing a separate product. These products consist of a plastic payment card and other accessories, and consumers...