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Direct and Indirect Risk-Taking Incentives of Inside Debt
We develop a model of managerial compensation structure and asset risk choice. The model provides predictions about the relation between credit spreads and different compensation components. First, we show that credit ...
Investment-Specific Shocks, Business Cycles, and Asset Prices
We introduce long-run investment productivity risk in a two-sector production economy to explain the joint behavior of macroeconomic quantities and asset prices. Long-run productivity risk in both sectors, for which we ...
International Capital Markets with Time-Varying Preferences
We propose a 2-country asset-pricing model where agents' preferences change endogenously as a function of the popularity of internationally traded goods. We determine the effect of the time-variation of preferences on ...