This study tests for a break in the persistence of EMU government bond yield spreads examining data from France, Italy and Spain and using German interest rates as a kind of benchmark. The results reported here provide evidence for breaks between 2006 and 2008. The persistence of the yield...

This study proposes models that can be used as shorthand analysis tools for CDS spreads and CDS spread changes. For this purpose, we examine the determinants of CDS spreads and spread changes on a broad database of 718 US firms during the period from early 2002 to early 2013. Contrary to...

Hedge fund returns are often explained using linear factor models such as Fung and Hsieh (2004). However, since most hedge funds live only for 3years, these linear regressions are subject to over-parameterization. I improve the out-of-sample accuracy of the linear factor model by combining...

This paper introduces a regime-switching combination approach to predict excess stock returns. The approach explicitly incorporates model uncertainty, regime uncertainty, and parameter uncertainty. The empirical findings reveal that the regime-switching combination forecasts of excess returns...

We derive exact expressions for the risk premia for general distributions in a Lucas economy and show that the errors when using log-linear approximations can be economically significant when the shocks are nonnormal. Assuming growth rates are Normal Inverse Gaussian (NIG) and fitting the...

This study integrates CBOE VIX Term Structure and VIX futures to simplify VIX option pricing in multifactor models. Exponential and hump volatility functions with one- to three-factor models of the VIX evolution are used to examine their pricing for VIX options across strikes and maturities. The...

For S&P 100 stocks, we find that the weekly returns over option-expiration (OE) weeks (a month’s third-Friday week) tend to be high, relative to: (1) the third-Friday weekly returns of other stocks with less option activity, (2) the own stock’s other weekly returns, (3) the risk, based on...

We propose an equilibrium asset pricing model in which agents with heterogeneous beliefs care about relative performance. We find that the concern with relative performance leads agents to trade more similarly, a development that has two effects. First, similar trading directly decreases...

The paper develops a structural credit risk model to study sovereign credit risk and the dynamics of sovereign credit spreads. The model features endogenous default and recovery rates that both depend on the interaction between domestic output fluctuations and global macroeconomic conditions. We...

When a firm cross-lists its shares in segmented markets, the price of the first issued share, as a reference, plays both an informational and anchoring role in pricing the second issued share. We develop a model illustrating the dual-role. Empirically, we examine a group of Chinese firms that...