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The Froot and Stein Model Revisited

Author

Listed:
  • Nils Hogh

    (Codan)

  • Oliver Linton

    (LSE)

  • Jens Nielsen

    (Codan)

Abstract

We investigate the model of Froot and Stein (1998), a model that has very strong implications for risk management. We argue that their conclusions are too strong and need to be qualified. Also, there are some unusual consequences of their model, which may be linked to the chosen pricing formula.

Suggested Citation

  • Nils Hogh & Oliver Linton & Jens Nielsen, 2004. "The Froot and Stein Model Revisited," Finance 0401004, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:0401004
    Note: Type of Document - pdf; prepared on win2000; to print on HP;
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    References listed on IDEAS

    as
    1. Froot, Kenneth A. & Stein, Jeremy C., 1998. "Risk management, capital budgeting, and capital structure policy for financial institutions: an integrated approach," Journal of Financial Economics, Elsevier, vol. 47(1), pages 55-82, January.
    2. Froot, Kenneth A. & Scharfstein, David S. & Stein, Jeremy C., 2008. "Risk management: coordinating corporate investment and financing policies," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 48(1), January.
    3. Elroy Dimson & Paul Marsh & Mike Staunton, 2003. "Global Evidence On The Equity Risk Premium," Journal of Applied Corporate Finance, Morgan Stanley, vol. 15(4), pages 27-38, September.
    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • G - Financial Economics

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