Craig Burnside, Mario Cerrato, and Zhekai Zhang ♦ We propose a novel pricing factor for currency returns motivated by the market-microstructure literature. Our factor aggregates order flow data to provide a measure of buying and selling pressure related to conventional…
Eric DeBodt, B. Espen Eckbo, and Richard W. Roll ♦ To protect inframarginal rents, rivals react to competition shocks by increasing product differentiation or lowering costs by standardizing products and production processes. We test these two mutually exclusive reactions by…
Hong Ru and Endong Yang ♦ Using transaction-level trade data from China Customs and loan data from the China Development Bank (CDB), we find that CDB credit to strategic industries at the top of supply chains leads to lower prices,…
Vicente J. Bermejo, Miguel A. Ferreira, Daniel Wolfenzon, and Rafael Zambrana ♦ We show cash windfalls affect the real economy by spurring entrepreneurship. We identify these effects using the Spanish Christmas Lottery, which provides a unique setting as prizes are…
François Degeorge and Giuseppe Pratobevera ♦ IPO underwriters have an incentive to underprice an IPO when they allocate shares to their affiliated funds. We label this conflict of interest “supernepotism” and we analyze its effect on IPO pricing. Using a…
Jens Hilscher, Robert A. Jarrow, and Donald R. van Deventer ♦ This paper proposes and estimates a tractable, arbitrage-free valuation model for corporate coupon bonds that includes a more realistic recovery rate process. Most existing studies use a recovery rate…
