Risk premia in the consumption capital asset pricing model depend on preferences and dividend. We develop a decomposition which allows a separate treatment of both components. We show that preferences alone determine the risk-return tradeoff measured by the Sharpe-ratio. In general, the...

We study a novel issue in the real-options-based technology innovation literature by means of double barrier contingent claims analysis.We show how much a ¯rm with the monopoly over a project is willing to spend in investment technology innovation that softens the irreversible cost of accessing...

This paper contributes to the comparative corporate governance literature by showing how cross-country differences in governance and legal standards affect the bondholder wealth effects of European merger and acquisitions (M&As).Using investment-grade Eurobonds, we find some remarkable...

This paper estimates the price of ethics by studying the risk-return relation in socially responsible investment (SRI) funds. Consistent with investors paying a price for ethics, SRI funds in many European and Asia-Pacific countries strongly underperform domestic benchmark portfolios by about 5%...

Using a simple dynamic consumption-based asset pricing model, this paper explores the implications of a representative investor with smooth ambiguity averse preferences [Klibano¤, Marinacci and Mukerji, Econometrica (2005)] and provides a comparative analysis of risk aversion and ambiguity...

Unlike in structural and reduced-form models, we use equity as a liquid and observable primitive to analytically value corporate bonds and credit default swaps.Restrictive assumptions on the .rm.s capital structure are avoided.Default is parsimoniously represented by equity value hitting the...

This paper analyzes convertible bond arbitrage on the Canadian market for the period 1998 to 2004.Convertible bond arbitrage is the combination of a long position in convertible bonds and a short position in the underlying stocks. Convertible arbitrage has been one of the most successful...

Abstract: We analyse daily lead-lag patterns in US equity and credit default swap (CDS) returns. We first document that equity returns robustly lead CDS returns. However, we find that the CDSlag is due to common (and not firm-specific) news and arises predominantly in response to positive...

This paper examines the investment performance of diamonds and other gems (sapphires, rubies, and emeralds) over the period 1999-2010, using a novel data set of auction transactions. Between 1999 and 2010, the annualized real USD returns for white and colored diamonds equaled 6.4% and 2.9%,...

Abstract: This paper examines the risk-return characteristics of investment grade gems (white diamonds, colored diamonds and other types of gems including sapphires, rubies, and emeralds). The transactions are coming from gem auctions and span the period 1999-2012. Over our time frame, the...