This is a thoroughly updated edition of Dynamic Asset Pricing Theory, the standard text for
doctoral students and researchers on the theory of asset pricing and portfolio selection in …

We examine the predictive power of the dividend yields for forecasting excess returns, cash
flows, and interest rates. Dividend yields predict excess returns only at short horizons …

A model of dynamic capital structure is proposed. Even though the optimal strategy is
implemented over an arbitrarily large number of restructuring‐periods, a scaling feature …

Using a simple dynamic asset pricing model, this paper investigates the relationship
between the precision of public information about economic growth and stock market …

Financial Asset Pricing Theory offers a comprehensive overview of the classic and the
current research in theoretical asset pricing. Asset pricing is developed around the concept …

This paper studies contingent claim valuation in a Lucas-type exchange economy. The
derived fundamental valuation equation differs from its Cox-Ingersoll-Ross production …

We conduct a detailed empirical study of the effects of cash flow volatility on corporate bond
yield spreads. We use both forward-looking and historical cash flow volatility measures …

The dynamics of the unobservable short rate are frequently estimated directly using a proxy.
We examine the biases resulting from this practice (the “proxy problem”). Analytic results …

Using daily data of the Nikkei 225 index, call option prices and call money rates of the
Japanese financial market, a comparison is made of the pricing performance of stock option …

We study a structural model that allows us to examine how credit spreads are affected by the
interaction of macroeconomic conditions and firm characteristics. Unlike most other …