#2006-044A "Corporate Response to Distress: Evidence from the Asian Financial Crisis"
by Mara Faccio, and Rajdeep Sengupta
July 2006

This paper provides a comprehensive examination of the ways in which companies respond to a country-wide crisis through the restructuring of their assets (through asset sales, mergers or liquidations) or liabilities. We find the restructuring of liabilities to be the most common type of response. More...

#2006-042A "The Termination of Subprime Hybrid and Fixed Rate Mortgages"
by Anthony Pennington-Cross, and Giang Ho
July 2006

Adjustable rate and hybrid loans have been a large and important component of subprime lending in the mortgage market. While maintaining the familiar 30-year term the typical adjustable rate loan in subprime is designed as a hybrid of fixed and adjustable characteristics. More...

#2006-036A "The Relation between Time-Series and Cross-Sectional Effects of Idiosyncratic Variance on Stock Returns in G7 Countries"
by Hui Guo, and Robert Savickas
May 2006

This paper suggests that CAPM-based idiosyncratic variance (IV) correlates negatively with future stock returns because it is a proxy for loadings on discount-rate shocks in Campbell’s (1993) ICAPM. The ICAPM also implies that there are important links between the time-series and cross-sectional IV effects. More...

#2006-034A "Why Do Analysts Continue to Provide Favorable Coverage for Seasoned Stocks?"
by Simona Mola, and Massimo Guidolin
May 2006

Research has documented that the first report an investment bank affiliated analyst issues on a newly listed stock tends to be favorable. Our analysis of 16,824 relationships between analyst teams and established listed companies during 1995-2003 indicates that analyst coverage decisions of seasoned stocks are influenced by their affiliations with investment banks and mutual funds. More...

#2006-033B "Central Bank Intervention with Limited Arbitrage"
by Christopher J. Neely, and Paul A. Weller
May 2006
Revised February 2007

Shleifer and Vishny (1997) pointed out some of the practical and theoretical problems associated with assuming that rational risk-arbitrage would quickly drive asset prices back to long-run equilibrium. More...

PUBLISHED: International Journal of Finance and Economics, April 2007, 12(2), pp. 249-60

#2006-031C "Central Bank Intervention and Exchange Rate Volatility, Its Continuous and Jump Components"
by Michel Beine, Jérôme Lahaye, Sébastien Laurent, Christopher J. Neely, and Franz C. Palm
May 2006
Revised February 2007

We analyze the relationship between interventions and volatility at daily and intra-daily frequencies for the two major exchange rate markets. More...

PUBLISHED: International Journal of Finance and Economics, April 2007, 12(2), pp. 201-23

#2006-029C "What Tames the Celtic Tiger? Portfolio Implications from a Multivariate Markov Switching Model"
by Massimo Guidolin, and Stuart Hyde
May 2006
Revised January 2008

We use multivariate regime switching vector autoregressive models to characterize the time-varying linkages among the Irish stock market, one of the top world performers of the 1990s, and the US and UK stock markets. More...

FORTHCOMING: Applied Financial Economics

#2006-028A "Investing for the Long-Run in European Real Estate"
by Carolina Fugazza, Massimo Guidolin, and Giovanna Nicodano
May 2006

We calculate optimal portfolio choices for a long-horizon, risk-averse investor who diversifies among European stocks, bonds, real estate, and cash, when excess asset returns are predictable. Simulations are performed for scenarios involving different risk aversion levels, horizons, and statistical models capturing predictability in risk premia. Importantly, under one of the scenarios, the investor takes into account the parameter uncertainty implied by the use of estimated coefficients to characterize predictability. More...

PUBLISHED: Journal of Real Estate Finance and Economics, January 2007, 34(1), pp. 35-80

#2006-027A "The Duration of Foreclosures in the Subprime Mortgage Market: A Competing Risks Model with Mixing"
by Anthony Pennington-Cross
April 2006

This paper examines what happens to mortgages in the subprime mortgage market once foreclosure proceeding are initiated. A multinominial logit model that allows for the interdependence of the possible outcomes or risks (cure, partial cure, paid off, and real estate owned) through the correlation of associated unobserved heterogeneities is estimated. More...

#2006-024A "Loan Servicer Heterogeneity and The Termination of Subprime Mortgages"
by Anthony Pennington-Cross, and Giang Ho
April 2006

After a mortgage is originated the borrower promises to make scheduled payments to repay the loan. These payments are sent to the loan servicer, who may be the original lender or some other firm. This firm collects the promised payments and distributes the cash flow (payments) to the appropriate investor/lender. More...