Research Lab

The traditional pricing methodology in finance values derivative securities as redundant assets that have no impact on equilibrium prices and allocations. This paper demonstrates that when the market is incomplete primary and derivative asset markets, generically, interact: the valuation of derivative and primary securities is a simultaneous pricing problem and primary security prices depend on the contractual characteristics of the derivative assets available.

Bernard Frieden and Lynne Sagalyn provide an in-depth analysis of public-private partnerships that have resulted in several large downtown retail redevelopment projects. These projects were dependent in part on an improvement in underlying factors such as the revitalization of the downtown office market. But, more important, these projects owe their existence to innovative entrepreneurial urban policy. This essay shows how current city policies evolved from the experience gained from redevelopment efforts launched under federal auspices.

In this paper we investigate whether the level of earnings divided by price at the beginning of the stock return period is relevant for evaluating earnings/returns associations. The primary model motivating this research relies on the idea that book value (owners' equity) and market value are both "stock" variables indicating the wealth of the firm's equity holders. The related "flow" variables (after adjusting for dividends) are, respectively, earnings divided by price at the beginning of the return period (A/P-1) and market returns.

This article evaluates the role of rate of return (ROE) in assessing cross-sectional differences in prices and price changes of ROE. Accounting ROE is traditionally regarded as the major summary number in financial statement analysis. Findings of the study indicate that ROE is best interpreted as a profitability measure and not as a risk measure and observed ROE indicates future profitability and thus distinguishes market-to-book ratios. The comparison of earnings to book values in the ROE calculation provides information about how earnings project to future earnings.

Focusing on asset returns governed by a factor structure, the APT is a one-period model, in which preclusion of arbitrage over static portfolios of these assets leads to a linear relation between the expected return and its covariance with the factors. The APT, however, does not preclude arbitrage over dynamic portfolios. Consequently, applying the model to evaluate managed portfolios contradicts the no-arbitrage spirit of the model.

Japan's capital markets have played a crucial role in the recent increase in the globalization of international capital markets. As a result it has become important to understand the similarities and differences in the way Japanese markets operate in comparison to the more familiar Anglo-American environment. One of the major differences that has attracted a great deal of attention is the relatively high average price/earnings [PE] ratio (Viner [1988]) for the stocks listed on the Tokyo Stock Exchange.

This article provides confirmatory evidence of the value-relevance of book values of oil and gas properties. Harris and Ohlson (1987) find that the book values correlate significantly with the inferred market values of oil and gas properties. Reserve recognition accounting requires the simultaneous publication of alternative measures that are often assumed to be more relevant values of the oil and gas properties.

A shopping mall, new office towers, a convention center, an atrium hotel, a restored historic neighborhood. These are the civic agenda for downtown development in the last third of the twentieth century, a trophy collection that mayors want. Add a domed stadium, aquarium, or cleaned-up waterfront to suit the circumstances, and you have the essential equipment for a first-class American city.