Learn More
This paper investigates the empirical characteristics of investor risk aversion over equity return states by estimating a time-varying pricing kernel, which we call the empirical pricing kernel (EPK). We estimate the EPK on a monthly basis from 1991 to 1995, using S&P 500 index option data and a stochastic volatility model for the S&P 500 return process. We(More)
and Jason Zweig for useful conversations and to Lipper Analytical Services for data on Texas municipal bond funds. Abstract. We examine the geographic distribution of the shareholders of the U.S. Regional Bell Operating Companies (RBOCs) and document that a customer of an RBOC is more likely to invest in his local company than in an RBOC in another service(More)
Pension Research Council Working Papers are intended to make research findings available to other researchers in preliminary form, to encourage discussion and suggestions for revision before final publication. Opinions are solely those of the authors. This paper is to appear in Pension Design and Structure: New Lessons from Behavioral Finance (forthcoming).(More)
Consider a trading environment where trading volume affects security prices. We show that when the price impact is time stationary, only linear price-impact functions rule out arbitrage. This is true whether a single asset or a portfolio of assets is traded. When the temporary and permanent effects of trades on prices are independent, only the permanent(More)
In an environment where trading volume affects security prices and where prices are uncertain when trades are submitted, quasi-arbitrage is the availability of a series of trades which generate inÞnite expected proÞts with an inÞnite Sharpe ratio. We show that when the price impact of trades is permanent and time-independent, only linear price-impact(More)
Dispersion in investor beliefs and short-selling constraints can lead to stock market bubbles. This paper argues that firms, unlike investors, can exploit such bubbles by issuing new shares at inflated prices. This lowers the cost of capital and increases real investment. Perhaps surprisingly, large bubbles are not eliminated in equilibrium nor do large(More)
Records of 793,794 employees eligible to participate in 647 defined contribution pension plans are studied. About 71% of them choose to participate in the plans, and of the participants, 12% choose to contribute the maximum allowed, $10,500. The main findings are (other things equal) (i) participation rates, contributions and (most remarkably) savings rates(More)