This paper analyzes how combining firms into either groups or conglomerates affects their credit standing, as measured by their de- fault probabilities, recovery rates and credit spreads. Each combina- tion offers protection against default to its affiliates, and issues debt to optimize the...

Household portfolios include risky bonds, beyond stocks, and respond to permanent labour income shocks. This paper brings these features into a life-cycle setting, and shows that optimal stock investment is constant or increasing in age before retirement for realistic parameter combinations. The...

This paper examines the ex-post performance of optimal portfolios with predictable returns, when the investor horizon ranges from one month to ten years. Due to the investor's ability to anticipate shifts from bull to bear markets, predictability involves the risk premium, volatility and...

Recent research [e.g., DeMiguel, Garlappi and Uppal, (2009a), Rev. Fin. Studies] has cast doubts on the out-of-sample performance of optimizing portfolio strategies relative to a naive, equally-weighted ones. However, most of the existing results concern the simple case in which an investor has...

Do equity markets help diversifying away industry-related labor income risk? This paper reconsiders the hedging role of stock markets by focusing on international equity diversification, rather than domestic asset allocation, and on industry wage, rather than individual labor income. We test for...

This paper develops a theory of corporate ownership and leverage of multi- ple firms under a tax-bankruptcy trade-off, allowing for internal bailouts. It then questions whether tax policy contributes to the default of the resulting complex or- ganization. Absent other taxes and non-financial...

The Ramón y Cajal Program promotes the hiring of top researchers in Spanish R&D centers and academic institutions. The centralized mechanism associated to the Program is analyzed. The paper models it as a two-sided matching market and studies if it provides the incentives to increase the...

In this paper we present a model of implementation based on the idea that agents renegotiate unfeasible allocations. We characterize the maximal set of Social Choice Correspondences that can be implemented in Nash Equilibrium with a class of renegotiation functions that do not reward agents for...

In a common-values election with two candidates voters receive a signal about which candidate is superior. They can acquire information that improves the precision of the signal. Electors differ in their information acquisition costs. For large electorates a non negligible fraction of voters...

This paper explores the relationship between optimal leverage and credit risk under ownership links. It develops a structural model of a parent and a subsidiary, which issues debt in its own name under a guarantee by the parent. We find that zero leverage can be optimal for the guarantor, while...