In this paper we investigate the short-term credit spread dynamics of quality US corporate bonds, building on the Longstaff and Schwartz (1995) two-factor model. We find that changes in credit spreads usually display a significant negative relationship with changes in both the risk-free short...

This paper examines a new set of implications for existing asset pricing models regarding the correlation between returns and consumption growth over both the short run and the long run. The findings suggest that external habit formation models face a challenge in producing two robust facts in...

A new class of foreign equity option pricing model is suggested that not only allows for the volatility but also for the correlation coefficient to vary stochastically over time. A modified Jacobi process is proposed to evaluate risk premium of the stochastic correlation, and a partial...

Purpose–The purpose of this paper is to explore the relations of investment and stock prices (Tobin-Q), the impact of asymmetric information on the investment sensitivity to stock price, and the impact of asymmetric information on the stock price sensitivity to investment....

This paper investigates an intertemporal general equilibrium theory of capital asset pricing with the spirit of capitalism. It is an attempt to put together ideas from the modern finance literature and the literature on stochastic growth models. Using methods adopted in Brock (1982), an...

A key issue in the estimation of energy hedges is the hedgers' attitude towards risk which is encapsulated in the form of the hedgers' utility function. However, the literature typically uses only one form of utility function such as the quadratic when estimating hedges. This paper addresses...

This study constructs a variety of GARCH models with the consideration of the generalized error distribution to analyze the relationship between the cloud cover and stock returns in Taiwan in the whole sample period (1986 to 2007) and in the two sub-sample periods (1986 to 1996 and 1997 to...

This review of the SAD hypothesis of Kamstra et al. (2003), hereafter KKL (2003), isolates four new problems. First, the KKL (2003) statistical model does not test the KKL (2003) SAD hypothesis. Second, KKL (2003) do not properly interpret their results. Third, KKL (2003) incorrectly specify the...

We provide evidence of a significant relation between diversification and performance in the hedge fund industry. Measuring diversification across four distinct dimensions, we find a significant positive relation between hedge fund performance and diversification across sectors and asset...

Quarterly earnings conference calls are becoming a more pervasive tool for corporate disclosure. However, the extent to which the market embeds information contained in the tone (i.e. sentiment) of conference call wording is unknown. Using computer aided content analysis, we examine the...