analyst forecasting errors additional evidence analyst forecasting errors are approximately as large as dreman and berry 1995 documented and an optimistic bias is evident for all years from 1985 through 1996 in contrast to their findings i show that analyst forecasting errors and bias have decreased over time moreover the optimistic bias in quarterly forecasts was absent for sp 2 firms with comparatively large amounts of market capitalization absolute value of earnings forecast and analyst following and 3 firms in certain industries

proper risk aversion on introduit et on etudie une condition comportementale significative sur les fonctions d utilite pour les richesses qui signifie qu une loterie indesirable ne peut jamais etre rendue desirable par la presence d une loterie indesirable independante

a note on comparative downside risk aversion abstract we provide comparative global conditions for downside risk aversion which are similar to the ones studied by ross for risk aversion we define a coefficient of downside risk aversion and study its local properties

non zero sum stochastic differential reinsurance and investment games with default risk this paper investigates the implications of strategic interaction i e competition between two cara insurers on their reinsurance investment policies the two insurers are concerned about their terminal wealth and the relative performance measured by the difference in their terminal wealth the problem of finding optimal policies for both insurers is modelled as a non zero sum stochastic differential game the reinsurance premium is calculated using the variance premium principle and the insurers can invest in a risk free asset a risky asset with heston s stochastic volatility and a defaultable corporate bond we derive the nash equilibrium reinsurance policy and investment policy explicitly for the game and prove the corresponding verification theorem the equilibrium strategy indicates that the best response of each insurer to the competition is to mimic the strategy of its opponent consequently either the reinsurance strategy or the investment strategy of an insurer with the relative performance concern is riskier than that without the concern numerical examples are provided to demonstrate the findings of this study

martingales and arbitrage in securities markets with transaction costs abstract we derive the implications from the absence of arbitrage in dynamic securities markets with bid ask spreads the absence of arbitrage is equivalent to the existence of at least an equivalent probability measure that transforms some process between the bid and the ask price processes of traded securities into a martingale the martingale measures can be interpreted as possible linear pricing rules and can be used to determine the investment opportunities available in such an economy the minimum cost at which a contingent claim can be obtained through securities trading is its largest expected value with respect to the martingale measures journal of economic literature classification numbers g11 g12 g13 d52 and d90

modelling the causes and manifestation of bank stress an example from the financial crisis in this study i model the predictors and manifestation of bank stress during the financial crisis using a multiple indicator multiple cause model unlike most early warning models that predict failure probabilities this article describes a framework for predicting a broader notion of bank stress that need not rely on regulatory decisions as such this method can be easily applied to large institutions and avoids the complications associated with modelling a regulatory decision such as failure or a camels downgrade using bank reliance on term auction facility funds and the out of sample incidence of failures and acquisitions i demonstrate that the measure of bank stress generated here accords with other notions of bank level distress finally this method catalogues predictors of distress during the financial crisis thus this article can help assess the validity of several recent regulatory proposals i find that those banks entering the crisis with more tier 1 capital more liquid balance sheets

on multivariate prudence in this paper we extend the theory of precautionary saving to the case in which uncertainty is multidimensional and we develop a matrix measure of multivariate prudence furthermore we characterize comparative prudence decreasing and increasing prudence the effect of uncertainty on the marginal propensity to consume out of wealth and the dreze modigliani substitution effect in this multivariate setting we also characterize the concept of multivariate downside risk aversion as a multivariate preference for harm disaggregation we show that our definition is equivalent to a positive precautionary saving motive we propose an alternative measure of the intensity of downside risk aversion and show that this measure is useful in understanding several economic problems that involve multivariate preferences

marketed surplus under risk do peasants agree with sandmo using a newly defined notion of aversion to income risk the behavior of the marketed surplus producer under price risk is characterized unlike the familiar case first examined by sandmo output depends on both ordinal preferences for goods and on risk attitudes conditions are found that yield an output level under risk that is smaller than under certainty if these conditions do not hold both risk and risk aversion may have a positive effect on output implications for econometric studies of risk attitudes are considered and illustrated with an example finally we examine the effect of uncertainty on the peasant s long run equilibrium

comparisons and combinations of long and long short strategies market neutral long short strategies get their returns from alphas and short rebates long strategies get their returns from alpha and the market differing return and risk sources complicate their comparison partly because of the strong market referenced focus of conventional performance analysis compelling theoretical advantages of active return per unit of active risk suggest that long short strategies are better able to deliver excess return than are conventional institutional long strategies long short strategies even with tiny positive alphas are seen to improve investors efficient frontiers when added to a traditional t bill long portfolio mix mostly because their risk sources are uncorrelated surprisingly the improvement occurs even if long short strategies are sharpe ratio inferior to long strategies these results provide theoretical support for including long short strategies in most investors mix of assets

a further look at household portfolio choice and health status abstract this paper investigates the effect of changes in health status on household financial wealth and financial portfolio choice it is shown that the impact of health events on household financial and non financial wealth is asymmetric a diagnosis of a new disease leads to a larger decrease in financial wealth than in non financial wealth moreover we find that the puzzle pertaining to the relationship between health status and portfolio choice discussed in the extant literature generally disappears after controlling for differences in the amount of financial assets held by healthy and sick people the results suggest that the effect of changes in health status on household financial portfolios is indirect a health shock significantly reduces household total financial wealth in turn leading households to restructure the composition of their financial assets

portfolio choices in the presence of other risks the effects of multivariate risk are examined in a model of portfolio choice the conditions under which portfolio choices are separable from consumption decisions are derived unless the appropriate restrictions hold on investors preferences or on the probability distribution of risks the optimal portfolio is affected by other risks this requires generalizing the usual measures of risk aversion with one risky asset matrix measures of risk aversion are used to generalize the results of arrow 1965 and pratt 1964 concerning the effects of risk aversion and wealth on the optimal portfolio with two risky assets the choices made by two investors coincide if and only if their generalized risk aversion measures are identical ross s notion of stronger risk aversion is then used to characterize the effect of risk aversion on the level of investment in the riskier asset

do bank characteristics influence the effect of monetary policy on bank risk abstract we analyze whether bank characteristics affect the impact of monetary policy on bank risk we find that the insulation effects produced by capital and liquidity were lower for banks operating in countries with particularly low interest rates

the efficiency gains of long short investing long short strategies have generated controversy and institutional interest for more than 10 years we analyzed the efficiency gains of long short investing where we defined efficiency as the information ratio of the implemented strategy the optimal portfolio relative to the intrinsic information ratio of the alphas the efficiency advantage of long short investing arises from the loosening of the surprisingly important long only constraint long short and long only managers need to understand the impact of this significant constraint long short implementations offer the most improvement over long only implementations when the universe of assets is large asset volatility is low and the strategy has high active risk the long only constraint induces biases particularly toward small stocks limits the manager s ability to act on upside information by not allowing short positions that could finance long positions and reduces the efficiency of traditional high risk long only strategies relative t

are bank shareholders enemies of regulators or a potential source of market discipline abstract in moral hazard models bank shareholders have incentives to transfer wealth from the deposit insurer that is maximize put option value by pursuing riskier strategies for safe banks with large charter value however the risk taking incentive is outweighed by the possibility of losing charter value focusing on the relationship between tobin s q and an ex ante measure of the failure probability this paper develops a semi parametric model for estimating the critical level of bank risk at which put option value starts outweighing charter value from these estimates we infer the prevalence of moral hazard examining publicly held bank holding companies bhc during the tumultuous 1986 1992 period we find that shareholders risk taking incentives were confined to a small fraction of highly risky institutions furthermore our analysis shows that the inflection point at which banks begin to tilt in favor of moral hazard increased substantially in 1993 2005 these findings are encouraging to bank regulators and legislators because they indicate that tighter capital rules and more rigorous supervision introduced by several legislative initiatives in the 1990s have helped squeeze a lot of the moral hazard incentives out of the banking system

on the utility premium of friedman and savage we re examine the utility premium of friedman savage friedman milton and savage leonard j the utility analysis of choices involving risk journal of political economy 56 1948 pp 279 304 this measure is useful in understanding risky choices for instance its reaction to an increased wealth equates to a precautionary demand for saving we also analyze its two components c 2009 published by elsevier b v

optimal portfolio choice for long horizon investors with nontradable labor income this paper examines how risky labor income and retirement affect optimal portfolio choice with idiosyncratic labor income risk the optimal allocation to stocks is unambiguously larger for employed investors than for retired investors consistent with the typical recommendations of investment advisors increasing idiosyncratic labor income risk raises investors willingness to save and reduces their stock portfolio allocation towards the level of retired investors positive correlation between labor income and stock returns has a further negative effect and can actually reduce stockholdings below the level of retired investors financial advisors typically recommend that their customers invest more in stocks than in safe assets when they are working and to shift their investments towards safe assets when they retire jagannathan and kocherlakota 1996 malkiel 1996 by contrast the standard academic models of portfolio choice merton 1969 1971 samuelson 1969 show that retirement is irrelevant for portfolio decisions if investment opportunities are constant and human capital is tradable in this case the fraction of wealth optimally invested in risky assets should be constant over the lifetime of an individual recent research building on the pioneering work by merton 1971 shows that time varying investment opportunities result in portfolio rules with an intertemporal hedging component whose magnitude depends on the investment horizon of the investor kim and omberg 1996 balduzzi and lynch 1997 brennan schwartz and lagnado 1997 brandt 1999 campbell and viceira 1999 2001 barberis 2000 with time variation in investment opportunities retirement and death play an instrumental role as events that exogenously fix the individual s investment horizon more importantly retirement also marks the time at which individuals stop working and thereafter must live off their lifetime savings and possibly transfers from this perspective retirement matters for portfolio choice

the ross characterization of risk aversion strengthening and extension this paper offers an interpretive comparison of the arrow pratt and ross characterizations of comparative risk aversion for expected utility maximizers the tools used in this comparison are then applied to obtain a strengthening of the ross cha racterization this strengthened result is in turn extended to the ca se of general smooth nonexpected utility preferences over probabili ty distributions copyright 1987 by the econometric society

leverage aversion and portfolio optimality portfolio volatility is the only source of risk in mean variance optimality but it fails to capture all the risks faced by leveraged portfolios these risks include the possibility of margin calls and forced liquidations at adverse prices and losses beyond the capital invested to recognize these risks the authors incorporated leverage aversion into the optimization process and examined the effects of volatility and leverage aversion on optimal long short portfolios

a latent variable model of quality determination because of data difficulties there has been little empirical work analyzing the determination of the quality of a firm s output this article constructs a latent variable model for this problem that uses easily obtainable data the model is developed from the relationship between the firm s input demand functions and reduced form output functions and it has a novel multiple indicator multiple cause mimic interpretation the model also allows identification of an intercept implying that an index of quality that is comparable across samples can be constructed as an example a latent variable model of nursing home quality is estimated

putting risk in its proper place this paper examines preferences toward particular classes of lottery pairs we show how such concepts as prudence and temperance can be fully characterized by a preference relation over these lotteries if preferences are defined in an expected utility framework with differentiable utility the direction of preference for a particular class of lottery pairs is equivalent to signing the nth derivative of the utility function what makes our characterization appealing is its simplicity which seems particularly amenable to experimentation

the behavior of stock prices around institutional trades all trades executed by 37 large investment management firms from july 1986 to december 1988 are used to study the price impact and execution cost of the entire sequence package of trades that we interpret as an order we find that market impact and trading cost are related to firm capitalization relative package size and most importantly to the identity of the management firm behind the trade money managers with high demands for immediacy tend to be associated with larger market impact financial economists have long studied the equity trading process and its impact on stock prices much prior empirical research isolates individual trades and analyzes the behavior of the stock price around each trade see for example kraus and stoll 1972a holthausen leftwich and mayers 1987 1990 keim and madhavan 1991 petersen and umlauf 1991 hausman lo and mackinlay 1992 and chan and lakonishok 1993 evaluating the behavior of stock prices around trades provides a means of discriminating among various hypotheses as to the elasticity of the demand for stocks yields an estimate of the cost of executing trades and a measure of the liquidity of a market and permits tests of different models of the determination of quotes and transaction prices for many institutional investors however even a moderately sized position in a stock may represent a large fraction of the stock s trading volume accordingly an investment manager s order is often broken up into several trades it is often misleading therefore to consider an individual trade as the basic unit of analysis in the study of trading activity and its effects on prices this paper uses the record of trades executed by 37 large investment manage

fundamentals of efficient factor investing corrected may 2017 combining long only constrained factor subportfolios is generally not a mean variance efficient way to capture expected factor returns for example a combination of four fully invested factor subportfolios low beta small size value and momentum captures less than half e g 40 of the potential improvement over the market portfolio s sharpe ratio in contrast a long only portfolio of individual securities using the same risk model and return forecasts captures most e g 80 of the potential improvement we adapt traditional portfolio theory to more recently popularized factor based investing and simulate optimal combinations of factor and security portfolios using the largest 1 000 common stocks in the us equity market from 1968 to 2015

60 years of portfolio optimization practical challenges and current trends abstract the concepts of portfolio optimization and diversification have been instrumental in the development and understanding of financial markets and financial decision making in light of the 60 year anniversary of harry markowitz s paper portfolio selection we review some of the approaches developed to address the challenges encountered when using portfolio optimization in practice including the inclusion of transaction costs portfolio management constraints and the sensitivity to the estimates of expected returns and covariances in addition we selectively highlight some of the new trends and developments in the area such as diversification methods risk parity portfolios the mixing of different sources of alpha and practical multi period portfolio optimization

portfolio choice and trading in a large 401 k plan we study nearly 7 000 retirement accounts during the april 1994 august 1998 period several interesting patterns emerge most asset allocations are extreme either 100 percent or zero percent in equities and there is inertia in asset allocations equity allocations are higher for males married investors and for investors with higher earnings and more seniority on the job equity allocations are lower for older investors there is very limited portfolio reshuffling in sharp contrast to discount brokerage accounts daily changes in equity allocations correlate only weakly with same day equity returns and do not correlate with future equity returns

using market information in prudential bank supervision a review of the u s empirical evidence in principle market and government supervision provide alternative devices for controlling governing any type of corporation most national governments have instituted nonmarket regulatory mechanisms for banking firms on the grounds that market based mechanisms do not adequately discipline banks but what evidence supports this assessment why must governments assure bank solvency but not the solvency of other firms government oversight naturally displaces private efforts to evaluate and control financial firms moreover if the banking business changes over time as it assuredly has in the past decade or two the best combination of government and private supervision may change concurrently this paper reviews and evaluates the growing empirical literature on private investors abilities to assess the financial condition of banking firms the evidence supports the proposition that market investors and analysts could reasonably provide a greater proportion of corporate governance services for large traded u s financial firms

in defense of portfolio optimization what if we can forecast author response we thank richard o michaud david n esch and robert o michaud for their interest in our paper in their letter they suggest that our results are inconsistent with the canonical literature beca

stronger measures of higher order risk attitudes this paper aims to extend the results by ross 1981 15 and by modica and scarsini 2005 13 to stochastic dominance of degree 4 and over specifically it is shown that ross approach can be extended to any order of risk attitude beyond the generalization proposed by modica and scarsini by means of sth degree increase in risk defined by ekern 1980 8 c 2010 elsevier inc all rights reserved

uncertainty and the demand for medical care abstract this paper provides an analysis of the effects of uncertainty on the demand for medical care using a simplified version of grossman s human capital model of the demand for health two types of uncertainty are analysed the uncertainty surrounding the incidence of illness and the uncertainty surrounding the effectiveness of medical care in the first the consumer s basic level of health is assumed to be a random variable in the second the effectiveness of medical care is assumed to be random comparative static results are reported indicating the effects on the demand for medical care of both increases in the means of these distributions and mean preserving spreads of the distributions

dynamic portfolio optimization with transaction costs heuristics and dual bounds we consider the problem of dynamic portfolio optimization in a discrete time finite horizon setting our general model considers risk aversion portfolio constraints e g no short positions return predictability and transaction costs this problem is naturally formulated as a stochastic dynamic program unfortunately with nonzero transaction costs the dimension of the state space is at least as large as the number of assets and the problem is very difficult to solve with more than one or two assets in this paper we consider several easy to compute heuristic trading strategies that are based on optimizing simpler models we complement these heuristics with upper bounds on the performance with an optimal trading strategy these bounds are based on the dual approach developed in brown et al brown d b j e smith p sun 2009 information relaxations and duality in stochastic dynamic programs oper res 58 4 785 801 in this context these bounds are given by considering an investor who has access to perfect information about future returns but is penalized for using this advance information these heuristic strategies and bounds can be evaluated using monte carlo simulation we evaluate these heuristics and bounds in numerical experiments with a risk free asset and 3 or 10 risky assets in many cases the performance of the heuristic strategy is very close to the upper bound indicating that the heuristic strategies are very nearly optimal this paper was accepted by dimitris bertsimas optimization

health and portfolio choices a diffidence approach the effect of health status on portfolio decisions has been extensively studied from an empirical viewpoint in this paper we propose a theoretical model of individuals choice of financial assets under bivariate utility functions depending on wealth and health our approach makes an extensive use of the diffidence theorem we establish the conditions under which the share of wealth held in risky assets falls as 1 individuals health status deteriorates and 2 individuals health status becomes risky these conditions are shown to be related to the behavior of the intensities of correlation aversion and of cross prudence as wealth increases

substituting one risk increase for another a method for measuring risk aversion abstract this paper defines the rate of substitution of one stochastic change to a random variable for another it then focuses on the case where one of these changes is an nth degree risk increase and the other is an mth degree risk increase where n m 1 the paper shows that the rate of substitution for these two risk increases can be used to provide a broader definition and two additional characterizations of the nth degree ross more risk averse partial order the implications for local intensity measures of nth degree risk aversion are also examined the analysis organizes the existing results as well as generates new ones

a model of competitive stock trading volume a model of competitive stock trading is developed in which investors are heterogeneous in their information and private investment opportunities and rationally trade for both informational and noninformational motives i examine the link between the nature of heterogeneity among investors and the behavior of trading volume and its relation to price dynamics it is found that volume is positively correlated with absolute changes in prices and dividends i show that informational trading and noninformational trading lead to different dynamic relations between trading volume and stock returns

on the optimality of long short strategies we consider the optimality of portfolios not subject to short selling constraints and derive conditions that a universe of securities must satisfy for an optimal active portfolio to be dollar neutr

changes in background risk and risk taking behaviour economic decision making under uncertainty often takes place in the presence of multiple risks and in markets that are less than complete as a consequence choices about endogenous risks sometimes must be made while simultaneously facing one or more immutable exogenous background risks that are not under the control of the agent and that are independent of endogenous risks it is somehow natural to assume that an exogenous deterioration in background wealth will cause an individual to take more care elsewhere if we define a deterioration for example as making the individual poorer by removing a fixed amount of initial wealth we know from pratt 1964 that decreasing absolute risk aversion dara of an individual s von neumann morgenstern utility function yields this natural result if on the other hand background wealth becomes riskier due to the addition of a zero mean risk that is also statistically independent of all other risks behavior will be more risk averse if and only if preferences are risk vulnerable as defined by gollier and pratt 1996 risk vulnerability described below in section 4 is a stronger notion than dara and includes proper risk aversion pratt and zeckhauser 1987 and standard risk aversion eeckhoudt and kimball 1992 kimball 1993 as particular cases but a deterioration in background wealth may encompass more complicated distribution changes than the introduction of another statistically independent risk in this paper we examine background wealth deteriorations that take the form of both general firstand second degree stochastic dominance changes in risk fsd and ssd respectively in particular we determine conditions that are both necessary and sufficient for each of these two types of background risk changes to imply more risk averse behavior on the part of the individual for the case of fsd changes this condition turns out to be ross stronger characterization of decreasing absolute risk aversion in the case of general ssd changes in the distribution of background wealth the condition derived is a stronger version in ross sense of the conditions characterizing preferences that are locally risk vulnerable in the sense of gollier and pratt the necessary and sufficient conditions derived are fairly restrictive upon preferences however if we take as positive behavior that individuals act in a more risk averse manner whenever the distribution of background wealth deteriorates these conditions place canonical limits upon appropriate utility representations at the very least they

labor supply flexibility and portfolio choice in a life cycle model abstract this paper examines the effect of the labor leisure choice on portfolio and consumption decisions over an individual s life cycle the model incorporates the fact that individuals may have considerable flexibility in varying their work effort including their choice of when to retire given this flexibility the individual simultaneously determines optimal levels of current consumption labor effort and an optimal financial investment strategy at each point in his life cycle we show that labor and investment choices are intimately related the ability to vary labor supply ex post induces the individual to assume greater risks in his investment portfolio ex ante

some stronger measures of risk aversion in the small and the large with applications the arrow pratt measures of risk aversion for von neumann morgenstern utility functions have become workhorses for analyzing problems in the microeconomics of uncertainty they have been used to characterize the qualitative properties of demand in insurance and asset markets to examine the properties of risk taking in taxation models and to study the interaction between risk and life cycle savings problems to name just a few applications equally importantly they have generated the linear risk tolerance class of utility functions which has provided canonical examples in such diverse areas as portfolio theory and the theory of teams despite these successes there have been a number of areas for which the results have been weaker than hoped it is natural to use the risk aversion measures to compare the behavior of individuals in risky choice situations for example consider the individual portfolio choice problem in a two asset world with a riskless asset and a risky asset if individual a has a uniformly higher arrow pratt coefficient of risk aversion than individual b then b will always choose a portfolio combination with more wealth invested in the risky asset but suppose that both assets are risky now there is no obvious sense in which the more risk averse individual can be said to hold a less risky portfolio but it seems strange that such a simple alteration should destroy the analytics which support the basic intuition similarly consider the basic insurance problem if one individual a is more risk averse than another b in the arrow pratt sense it follows that a will pay a larger premium to insure against a random loss than will b typically though an individual evaluates partial rather than total insurance that is only some gambles can be insured against and others must be retained in this case even when the gambles which are retained are independent from those which are insured it is no longer true that the individual whose arrow pratt measure of risk aversion is higher will pay a larger insurance premium the situation is no better when we consider comparative statics exercises for a single individual decreasing absolute risk aversion in the sense of arrow and

portfolio constraints and the fundamental law of active management active portfolio management is typically conducted within constraints that do not allow managers to fully exploit their ability to forecast returns constraints on short positions and turnover for example are fairly common and materially restrictive other constraints such as market capitalization and value growth neutrality with respect to the benchmark or economic sector constraints can further restrict an active portfolio s composition we derive ex ante and ex post correlation relationships that facilitate the performance analysis of constrained portfolios the ex ante relationship is a generalized version of a previously developed fundamental law of active management and provides an important strategic perspective on the potential for active management to add value the ex post correlation relationship represents a practical decomposition of performance into the success of the return prediction process and the noise associated with portfolio constraints we verify the accuracy of these relati

optimal consumption choices for a large investor abstract this paper examines the optimal consumption and investment problem for a large investor whose portfolio choices affect the instantaneous expected returns on the traded assets alternatively our analysis can be interpreted in terms of an optimal growth problem with nonlinear technologies existence of optimal policies is established using martingale and duality techniques under general assumptions on the securities price process and the investor s preferences as an illustration of our characterization result explicit solutions are provided for specific examples involving an agent with logarithmic utilities and a generalized two factor version of the ccapm is derived the analogy of the consumption problem examined in this paper to the consumption problem with constraints on the portfolio choices is emphasized

performance attribution and the fundamental law the reported study operationalized the fundamental law of active management in the context of a factor based performance attribution system the system incorporates factor payoffs in the linear regression framework that many portfolio managers and external reviewers use to judge what is being rewarded in the market the study indicates that parameters of the fundamental law can be used to approximate and interpret the results of the regression based performance attribution system the procedure is illustrated by the use of security holdings returns and factor exposure data for two portfolios benchmarked to the s p 500 index for april 1995 to march 2004

on the strategic behavior of large investors a mean variance portfolio approach abstract one key assumption of markowitz s model is that all traders act as price takers in this paper we extend this mean variance approach in a setting where large investors can move prices instead of having an individual optimization problem we find the investors nash equilibrium and redefine the efficient frontier in this new framework we also develop a simplified application of the general model with two assets and two investors to shed light on the potential strategic behavior of large and atomic investors our findings validate the claim that large investors enhance their portfolio performance in relation to perfect market conditions besides we show under which conditions atomic investors can benefit in relation to the standard setting even if they have not total influence on their eventual performance the two investors two assets setting allows us to quantify performance and do sensitivity analysis regarding investors market power risk tolerance and price elasticity of demand finally for a group of well known etfs we empirically show how price variations change depending on the volume traded we also explain how to set up and use our model with real market data

trading volume and serial correlation in stock returns this paper investigates the relationship between aggregate stock market trading volume and the serial correlation of daily stock returns for both stock indexes and individual large stocks the first order daily return autocorrelation tends to decline with volume the paper explains this phenomenon using a model in which risk averse market makers accommodate buying or selling pressure from liquidity or noninformational traders changing expected stock returns reward market makers for playing this role the model implies that a stock price decline on a high volume day is more likely than a stock price decline on a low volume day to be associated with an increase in the expected stock return

separating the likelihood and timing of bank failure abstract we use a split population survival time model to separate the determinants of bank failure from the factors influencing the survival time of failing banks basic indicators of a bank s condition such as capital troubled assets and net income are important in explaining the timing of bank failure however many of the other variables typically included in bank failure models such as measures of bank liquidity are not associated with the time to failure the results also suggest that the closure of large banks is not delayed relative to the closure of small banks