# University of California at Berkeley

# Research Program in Finance Working Papers

Postal: University of California at Berkeley, Berkeley, CA USA

Phone: 510-642-0822

Fax: 510-642-6615

Web page: http://haas.berkeley.edu/finance/WP/rpflist.html

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Phone: 510-642-0822

Fax: 510-642-6615

Web page: http://haas.berkeley.edu/finance/WP/rpflist.html

Email:

More information through EDIRC

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**Series handle:**repec:ucb:calbrf

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### 2000

**RPF-295 On Adaptive Tail Index Estimation for Financial Return Models***by*Niklas Wagner and Terry Marsh.**RPF-294 Rational Markets: Yes or No? The Affirmative Case***by*Mark Rubinstein.**RPF-293 Return-Volume Dependence and Extremes in International Equity Markets***by*Terry A. Marsh and Niklas Wagner.**RPF-292 On the Relation Between Binomial and Trinomial Option Pricing Models***by*Mark Rubinstein.**RPF-291 Corporate Diversification and Agency***by*Benjamin E. Hermalin and Michael L. Katz.**RPF-256-Rev How Do Firms Choose Their Lenders? An Empirical Investigation***by*Miguel Cantillo and Julian Wright.

### 1999

**RPF-289 Credit Derivatives in Banking: Useful Tools for Managing Risk?***by*Gregory R. Duffee and Chunsheng Zhou.**RPF-288 Order Flow and Exchange Rate Dynamics***by*Martin D. D. Evans and Richard K. Lyons.**RPF-287 The Role of a Corporate Bond Market in an Economy - and in Avoiding Crises***by*Nils H. Hakansson**RPF-286 Housing Return and Construction Cycles***by*Matthew Spiegel.

### 1998

**RPF-285 Search Costs: The Neglected Spread Component***by*Mark D. Flood Ronald Huisman Kees G. Koedijk and Richard Lyons.**RPF-284 Valuation and Return Dynamics of New Ventures***by*Jonathan B. Berk Richard C. Green and Vasant Naik.**RPF-283 Predicting Excess Returns with Public and Insider Information: The Case of Thrift Conversions***by*James A. Wilcox and Zane D. Williams.**RPF-282 The "Credit Crunch" and the Availability of Credit to Small Business***by*Diana Hancock and James A. Wilcox.**RPF-281 Dynamic Optimal Risk Management and Dividend Policy under Optimal Capital Structure and Maturity***by*Michael P. Ross.**RPF-280 Corporate Hedging: What, Why and How?***by*Michael P. Ross.**RPF-279 Pricing Derivatives the Martingale Way***by*Pierre Collin Dufresne William Keirstead and Michael P. Ross.**RPF-278 Agency Costs, Risk Management, and Capital Structure***by*Hayne E. Leland.**RPF-277 Applying the Grinblatt-Titman and the Conditional (Ferson-Schadt) Performance Measures: The Case of Industry Rotation Via the Dynamic Investment Model***by*Robert R. Grauer and Nils H. Hakansson.

### 1997

**RPF-276 Closed-End Fund Discounts in a Rational Agent Economy***by*Matthew Spiegel.**RPF-275 Edgeworth Binomial Trees***by*Mark Rubinstein.**RPF-274-Rev Derivatives Performance Attribution***by*Mark Rubinstein.**RPF-273 Profits and Position Control: A Week of FX Dealing***by*Richard K. Lyons.**RPF-272 Bank Risk Management: Theory***by*David H. Pyle.**RPF-271 International Portfolio Investment Flows***by*Michael J. Brennan. and H. Henry Cao.**RPF-270 Is There Private Information in the FX Market? The Tokyo Experiment***by*Takatoshi Ito Richard K. Lyons and Michael T. Melvin.

### 1996

**RPF-269 Are Investors Reluctant to Realize Their Losses?***by*Terrance Odean.**RPF-268 A Theory of Corporate Capital Structure and Investment***by*Miguel Cantillo Simon.**RPF-267 Options and Expectations***by*Hayne E. Leland.**RPF-266 Volume, Volatility, Price and Profit When All Trader Are Above Average***by*Terrance Odean.**RPF-265 Recovering Risk Aversion from Option Prices and Realized Returns***by*Jens Carsten Jackwerth.**RPF-264 Generalized Binomial Trees***by*Jens Carsten Jackwerth.**RPF-263-rev Beyond Mean-Variance: Performance Measurement of Portfolios Using Options or Dynamic Strategies***by*Hayne E. Leland.**RPF-262 Implied Binomial Trees: Generalizations and Empirical Tests***by*Jens Carsten Jackwerth.**RPF-261 Optimal Asset Rebalancing in the Presence of Transactions Costs***by*Hayne Leland.**RPF-260 Stock Price Volatility in a Multiple Security Overlapping Generations Model***by*Matthew Spiegel.

### 1995

**RPF-259 Optimal Capital Structure, Endogenous Bankruptcy, and the Term Structure of Credit Spreads***by*Hayne E. Leland and Klaus Bjerre Toft.**RPF-258 Imperfect Competition in Securities Markets with Diversely Informed Traders***by*H. Henry Cao.**RPF-257 The Efficacy of Insider Trading Regulation***by*Matthew Spiegel and Avanidhar Subrahmanyam.**RPF-255 A Theory of Corporate Capital Structure and Investment***by*Miguel Cantillo.**RPF-254-Rev The Rise and Fall of Bank Control in the United States: 1890-1920***by*Miguel Cantillo.**RPF-253 A Spatial Model of Housing Returns and Neighborhood Substitutability***by*William N. Goetzmann and Matthew Spiegel.**RPF-252 Pricing Mortgage-Backed Securities in a Multifactor Interest Rate Environment: A Multivariate Density Estimation Approach***by*Jacob Boudoukh Matthew Richardson Richard Stanton and Robert F. Whitelaw.**RPF-251 Mortgage Choice: What's the Point?***by*Richard Stanton and Nancy Wallace.**RPF-250 Implied Probability Distributions: Empirical Analysis***by*Jens Carsten Jackwerth and Mark Rubinstein.**RPF-249 A Variable Reduction Technique for Pricing Average-Rate Options***by*Hua He and Akihiko Takahashi.**RPF-248 Double Lookbacks***by*Hua He William P. Keirstead and Joachim Rebholz.**RPF-247 Anatomy of an ARM: Index Dynamics and Adjustable Rate Mortgage Valuation***by*Richard Stanton and Nancy Wallace.**RPF-246 Effects of Competition on Bidder Returns***by*Sankar De Mark Fedenia and Alexander J. Triantis.**RPF-245 On Revelation of Private Information in Stock Market Economies***by*Marcus Berliant and Sankar De.**RPF-244 Optimal Cash Management for Investment Funds***by*Hayne Leland and Gregory Connor.**RPF-243 Foreign Exchange Volume: Sound and Fury Signifying Nothing?***by*Richard K. Lyons.**RPF-242 Explaining Forward Exchange Bias...Intraday***by*Richard K. Lyons and Andrew K. Rose.

### 1994

**RPF-241 On the Accounting Valuation of Employee Stock Options***by*Mark Rubinstein.**RPF-240 Bond Prices, Yield Spreads, and Optimal Capital Structure with Default Risk***by*Hayne Leland.**RPF-239 Gains from Diversifying into Real Estate: Three Decades of Portfolio Returns Based on the Dynamic Investment Model***by*Robert R. Grauer and Nils H. Hakansson.**RPF-238 Options on Leveraged Equity with Default Risk***by*Klaus Bjerre Toft.**RPF-237 Exact Formulas for Expected Hedging Error and Transactions Costs in Option Replication***by*Klaus Bjerre Toft.**RPF-236 Dynamic Aggregation and Computation of Equilibria in Finite-Dimensional Economies with Incomplete Financial Markets***by*Domenico Cuoco and Hua H.**RPF-235 Market Structure and Liquidity on the Tokyo Stock Exchange***by*Bruce N. Lehmann and David M. Modest.**RPF-234 Trading and Liquidity on the Tokyo Stock Exchange: A Bird's Eye View***by*Bruce N. Lehmann and David M. Modest.**RPF-233 Corporate Debt Value, Bond Covenants, and Optimal Capital Structure***by*Hayne E. Leland.**RPF-232 Implied Binomial Trees***by*Mark Rubinstein.

### 1993

**RPF-231 Optimal Transparency in a Dealership Market with an Application to Foreign Exchange***by*Richard K. Lyons.**RPF-230 Tests of Microstructural Hypotheses in the Foreign Exchange Market***by*Richard K. Lyons.**RPF-229 The Economic Functions of Derivatives: An Academician's Point of View***by*David Pyle.**RPF-228 Differential Information and Dynamic Behavior of Stock Trading Volume***by*Hua He and Jiang Wang.**RPF-227 The U.S. Savings and Loan Crisis***by*David H. Pyle.**RPF-226 Long-Term Debt Value, Bond Covenants, and Optimal Capital Structure***by*Hayne Leland.**RPF-225 Liquidation Costs and Risk- Based Bank Capital***by*Helena M. Mullins and David H. Pyle.

### 1992

**RPF-224 The Strategic Timing of Corporate Disclosures***by*Gerard Gennotte and Brett Trueman.**RPF-223 Market Frictions and Consumption-Based Asset Pricing***by*Hua He and David M. Modest.**RPF-222 Further Evidence on Performance Evaluation: Portfolio Holdings, Recommendations, and Turnover Costs***by*Gonzalo Rubio.

### 1991

**RPF-221 Equilibrium Asset Price Processes***by*Hua He and Hayne Leland.**RPF-220 Exotic Options***by*Mark Rubinstein.**RPF-219 Continuous Equilibrium in Speculative Markets with Heterogeneous Information***by*Lewis X. Lu.**RPF-218 Optimal Continuous Speculation with Information Extracted from Price History***by*Lewis X. Lu.**RPF-217 Portfolio Policies with Transactions Costs: Discrete Time Model***by*Alan Jung.**RPF-216 Commissions and Asset Allocation***by*Gerard Gennotte and Alan Jung.**RPF-215 Efficient Consumption-Portfolio Policies***by*Hua He and Chi-fu Huang.**RPF-214 Supershares***by*Nils Hakansson.**RPF-213 Investment Strategies under Transaction Costs: The Finite Horizon Case***by*Gerard Gennotte and Alan Jung.**RPF-212 Welfare Economics of Financial Markets***by*Nils H. Hakansson.**RPF-211 Low Margins, Derivative Securities, and Volatility***by*Gerard Gennotte and Hayne Leland.**RPF-210 Variations in Economic Uncertainty and Risk Premiums on Capital Assets***by*Gerard Gennotte and Terry A. Marsh.**RPF-209 Optimal Consumption-Portfolio Policies: A Convergence from Discrete to Continuous Time Models***by*Hua He.**RPF-208 The Prepayment Uncertainty of Collateralized Mortgage Obligations***by*Steven E. Plaut.**RPF-207 Reinsurance and Securitization of Deposit Insurance; A Workable Proposal for Risk-Based Pricing***by*Steven E. Plaut.**RPF-206 On the Use of Mean-Variance and Quadratic Approximations in Implementing Dynamic Investment Strategies: A Comparison of Returns and Investment Policies***by*Robert R. Grauer and Nils H. Hakansson.**RPF-205 Continuously Rebalanced Investment Strategies***by*Mark Rubinstein.**RPF-201 Industry vs. Other Factors in Risk Prediction***by*Jivendra K. Kale Nils H. Hakansson and Gerald W. Platt.

### 1990

**RPF-203 Black Monday in New York, Blue Tuesday in Tokyo: The October 1987 Crash in Japan***by*Ulrike Schaede.**RPF-202 Specialist vs. Saitori: Market Making in New York and Tokyo***by*Richard R. Lindsey and Ulrike Schaede.**RPF-200 Consumption and Portfolio Decisions with Labor Income and Borrowing Constraints***by*Hua He and Henri F. Pags.**RPF-199 Convergence from Discrete to Continuous Time Contingent Claims Prices***by*Hua He.**RPF-198 Pitfalls in Fisher Model Building: Interest Rates and Inflation in the Interwar Period***by*Joe Peek and James A. Wilcox.**RPF-197. Capital Controls and Bank Risk***by*Gerard Gennotte & David Pyle**RPF-196 The Relationship Between Non- Arbitrage and Recursive Competitive Equilibrium Pricing***by*Richard Breen and Gregory Connor.**RPF-195 Insider Trading: Should It Be Prohibited?***by*Hayne E. Leland.**RPF-194 Stein and CAPM Estimators of the Means in Portfolio Choice: A Case of Unsuccess***by*Robert R. Grauer and Nils H. Hakansson.**RPF-193 Moment Approximation and Estimation of Diffusion Models of Asset Prices***by*Hua He.**RPF-04 Market Makers, Asymmetric Information and Price Information***by*Richard R. Lindsey.

### 1989

**RPF-192 Market Liquidity, Hedging and Crashes***by*Gerard Gennotte and Hayne Leland.**RPF-191 Consumption and Portfolio Policies with Incomplete Markets and Short-Sale Constraints: The Infinite Dimensional Case***by*Hua He and Neil D. Pearson.**RPF-190 Convergence from Discrete to Continuous Time Financial Model***by*Hua He.**RPF-189 Consumption and Portfolio Policies with Incomplete Markets and Short-Sale Constraints: The Finite Dimensional Case***by*Hua He and Neil D. Pearson.**RPF-188 Industry Rotation in the U.S. Stock Market: 1934-1986 Returns on Passive, Semi-passive, and Active Strategies***by*Robert R. Grauer Nils H. Hakansson and Frederick C. Shen.**RPF-187 Market Basket Alternatives***by*Mark Rubinstein.**RPF-186 Competitive Pricing of Demand Deposits***by*David H. Pyle and Avinash K. Verma.**RPF-185 LBOs and Taxes: No One to Blame But Ourselves?***by*Hayne E. Leland.**RPF-184 Market Liquidity, Hedging and Crashes***by*Gerard Gennotte and Hayne Leland.

### 1988

**RPF-183 The Arbitrage Pricing Theory: A State-Preference Analysis***by*Mark Latham.**182 Money and Off-Balance-Sheet Liquidity: An Empirical Analysis***by*Reuven Glick and Steven E. Plaut.**181 The Attributes, Behavior and Performance of U.S. Mutual Funds***by*Gregory Connor and Robert A. Korajczyk.

### 1987

**180 Debt and Market Incompleteness***by*Ehud I. Ronn and Lemma W. Senbet.**179 Stock Prices, Risk Premia, Inflation, and Uncertainty***by*Yoon Dokko and Robert H. Edelstein.**178 Off-Balance-Sheet Liquidity and Monetary Control***by*Reuven Glick and Steven E. Plaut.**177 Ex-Ante Characterization of an Efficient Portfolio***by*Richard C. Grinold.**176 An Intertemporal Equilibrium Beta Pricing Model***by*Gregory Connor and Robert Korajczyk.**175 New Cross-Sectional Regression Tests of Beta Pricing Models***by*Gregory Connor and Robert T. Uhlaner.**174 Risk and Return in an Equilibrium APT***by*Gregory Connor and Robert Korajczyk.**173 Estimating Pervasive Economic Factors with Missing Observations***by*Gregory Connor and Robert A. Korajczyk.**172 The Pricing of Bank Loans with Contingent Assets and Liabilities***by*Steven E. Plaut and Arie L. Melnik.**171 A New Option Spread Arbitrage Condition: Theory, Tests and Investment Strategies***by*Aimee G. Ronn and Ehud I. Ronn.**170 Non-Additive Preferences and the Marginal Propensity to Consume***by*Ehud I. Ronn.**169 A Multi-Attribute Comparative Evaluation of a Relative Risk for a Sample of Banks***by*Ehud I. Ronn and Avinash K. Verma.**168 Gains from International Diversification: l968-85 Returns on Portfolios of Stocks and Bonds***by*Robert R. Grauer and Nils H. Hakansson.**167 Stock Splits, Volatility Increases and Implied Volatilities***by*Aamir Sheikh.**166 Multiple Factor Risk Models and Exact Factor Pricing***by*Richard C. Grinold.

### 1986

**165 Inflation Futures and a Riskless Real Interest Rate***by*Bjorn Flesaker and Ehud I. Ronn.**164 Informational Efficiency and the Private Value of Information***by*Mark Latham.**163 Dividend Behavior for the Aggregate Stock Market***by*Terry A. Marsh and Robert C. Merton.**162 Empirical Assessment of Present Value Relations***by*Joe Mattey and Richard Meese.**161 On the Rationality of Common Stock Return Volatility***by*Ehud I. Ronn.**160 The Determination of Capital Adequacy Standards for Banks***by*Ehud I. Ronn and Avinash K. Verma.**159 A New Linear Programming Approach to Bond Portfolio Management***by*Ehud I. Ronn.**158 Financial Deregulation***by*David H. Pyle.

### 1985

**157 Stock Market Returns and Inflation: The Effects of Economic Uncertainty***by*Yoon Dokko and Robert H. Edelstein.**156 Aspects of Optimal Multiperiod Life Insurance***by*David F. Babbel and Eisaku Ohtsuka.**155 The Brennan and Schwartz Two Factor Model of the Term Structure of Interest; Empirical Extension***by*David F. Babble.**154 Optimal Insurance of the Common Form Under Moral Hazard***by*David F. Babbel and Jaime Cuevas Dermody.**153 A Half-Century of Returns on Levered and Unlevered Portfolios of Stocks, Bonds, and Bills, With and Without Small Stocks***by*Robert R. Grauer and Nils Hakansson.**152 Pricing Risk-Adjusted Deposit Insurance***by*Ehud I. Ronn and Avinash K. Verma.**151 A Utility-Based Model of Common Stock Price Movements***by*Robert H. Litzenberger and Ehud I. Ronn.**150 Defining Capital-Market Efficiency***by*Mark Latham.**149 International Arbitrage Pricing Theory: An Empirical Investigation***by*D. Chinhyung Cho Cheol S. Eun and Lemma W. Senbet.**148 Tax Effects of Production and Finance***by*Robert M. Dammon and Lemma W. Senbet.**146 Taxable and Tax-Exempt Interest Rates: The Role of Personal and Corporate Tax Rates***by*Joe Peek and James A. Wilcox.**145 Short-Term Movements of Long-Term Interest Rates: Evidence from the U.K. Indexed Market***by*James A. Wilcox.

### 1984

**147 Portfolio Choice in Research and Development***by*Sudipto Bhattacharya and Dilip Mookherhee.**144 Option Pricing and Replication with Transactions Costs***by*Hayne E. Leland.**143 Dealerships, Trading Externalities, and General Equilibrium***by*Sudipto Bhattacharya and Kathleen Hagerty.

### 1983

**142 Pricing Deposit Insurance: The Effects of Mismeasurement***by*David H. Pyle.**141 Default Risk, Liquidity and Loan Commitments***by*David H. Pyle and Jeffrey Skelton.**140 Are Asset-Demand Functions Determined by CAPM?***by*Jeffrey A. Frankel and William T. Dickens.**139 Hedging With Stock Index Futures: Theory and Application in a New Market***by*Stephen Figlewski.**138 Why Are Prices for Stock Index Futures So Low?***by*Stephen Figlewski.**137 Market Timing and Mutual Fund Performance: An Empirical Investigation***by*Roy D. Henriksson.**136 Portfolio Strategies Using Treasury Bond Options and Futures***by*James W. Hoag and Dennis Draper.**135 Bank Income Taxes and Interest Rate Risk Management***by*Eitan Gurel and David Pyle.

### 1982

**134 Risk Adjusted Discounting***by*Sasson Bar-Yosef and Hayne Leland.**133 Ex Post Stockholder Unanimity: A Complete and Simplified Treatment***by*James A. Ohlson.**132 International Portfolio Choice and Corporation Finance: A Survey***by*Michael Adler and Bernard Dumas.**131 On the Doubling Strategy Paradox and the Definition of Arbitrage***by*Avi Bick.**130 The Efficiency of the Forward Exchange Market: A Conditional Nonparametric Test of Forecasting Ability***by*Roy D. Henriksson and Donald R. Lessard.**129 The Postwar Stability of the Fisher Effect***by*Joe Peek and James A. Wilcox.**128 Excess Reserves in the Great Depression***by*James A. Wilcox.**127 On the Positive Role of Financial Intermediation in Allocation of Venture Capital in a Market with Imperfect Information***by*Yuk-Shee Chan.**126 Optimal Duration of Growth Investments -- A Bayesian Approach***by*Itzhak Venezia.**125 Comments on the Valuation of Derivative Assets***by*Avi Bick.**124 To Pay or Not to Pay Dividends***by*Nils H. Hakansson.

### 1981

**123 Changes in the Financial Market: Welfare and Price Effects and the Basic Theorems of Value Conservation***by*Nils H. Hakansson.**122 Sufficient and Necessary Conditions for Information to Have Social Value in Pure Exchange***by*Nils H. Hakansson & J. Gregory Kunkel & James A. Ohlson.**121 The Impact of the Government on Financial Equilibrium and Corporate Financial Decisions***by*Sasson Bar-Yosef and Yoram Landskroner.**120 The Stability of UK Risk Measures and the Problem of Thin Trading***by*Elroy Dimson and Paul Marsh.**119 A Simple Formula for the Expected Rate of Return of an Option over a Finite Holding Period***by*Mark Rubinstein.**118 Displaced Diffusion Option Pricing***by*Mark Rubinstein.**117 Nonparametric Tests of Alternative Option Pricing Models Using All Reported Trades and Quotes on the 30 Most Active CBOE Option Classes from August 23, l976 through August 31, l978***by*Mark Rubinstein.**116 Information Production, Market Signalling, and the Theory of Financial Intermediation: A Comment***by*Yuk-Shee Chan.**114 Interest Rates, Expected Inflation, and Supply Shocks or Why Real Interest Rates Were So Low in the l970s***by*James A. Wilcox.**113 A Characterization of Self-Financing Portfolio Strategies***by*Yaacov Z. Bergman.**111 An Analytical Model and Evaluation of a Modern Market Clearing System***by*Jivendra Kale.**109 Option Pricing with Different Interest Rates for Borrowing and for Lending***by*Yaacov Z. Bergman.

### 1980

**99 Macro and Micro Tests of the Mean Variance and Linear Risk Tolerance Capital Asset Pricing Models***by*Robert R. Grauer.**98 A Synthesis of the Pure Theory of Arbitrage***by*Mark B. Garman.**107 Deregulation and Monetary Control: Historical Perspective and Impact of the l980 Act***by*Thomas F. Cargill and Gillian G. Garcia.**106 On the Feasibility of Automated Market Making by a Programmed Specialist***by*Nils H. Hakansson Avraham Beja and Jivendra Kale.**105 Time Dominance Efficiency Analysis***by*Steinar Ekern.**104 Market Value Maximization and Markov Dynamic Programming***by*Richard C. Grinold.**103 Valuation of Risky Assets in Arbitrage-Free Economies with Transactions Costs***by*Mark B. Garman and James A. Ohlson.**102 Deposit Costs and Mortgage Rates***by*David H. Pyle.**101 The Works of Paul H. Cootner: A Review Essay***by*David H. Pyle.**100 A Comparison of Growth Optimal and Mean Variance Investment Policies***by*Robert R. Grauer.

### 1979

**97 Toward Measures of Real Estate Value, Return, and Risk***by*James W. Hoag.**96 Signaling and the Valuation of Unseasoned New Issues***by*David H. Downes and Robert Heinkel.**95 Who Should Buy Portfolio Insurance?***by*Hayne E. Leland.**94 The Option Value of Reserves of Natural Resources***by*Octavio A. F. Tourinho.**93 Credit Cards in an Interdisciplinary Survey: Toward a General Theory of Consumer Behavior***by*Gillian Garcia.**92 Repurchase Agreements: Bias and Inconsistency in the Estimation of the Money-Demand Function***by*Gillian Garcia and Simon Pak.**91 Welfare Comparisons of Financial Markets and the Basic Theorems of Value Conservation***by*Nils H. Hakansson.