The representative agent model (RA) has dominated macroeconomics for the last thirty years. This model does a reasonably good job of explaining the co-movements of consumption, investment, GDP and employment during normal times. But it cannot easily explain movements in asset prices. Two facts are hard to understand 1) The return to equity is highly volatile and 2) The premium for holding equit...

Climate policy proposals based on cap and trade mechanisms with tight caps will likely lead to highly volatile CO2 prices. This volatility is ignored in many studies, even though it can be expected to exceed that of natural gas and to exceed the wide ranges in CO2 price forecasts. Volatility will significantly increase investment risk, raise the cost of capital, and make it valuable to defer in...

We study a model of a decentralized firm with moral hazard and intrafirm trade. Relationship-specific investments, by making internal trade more profitable at the margin, result in greater expected trade volume and thereby greater compensation risk borne by division managers. Formally accounting for this investment/risk link overturns some key findings in prior incomplete contracting studies. F...

the bullwhip effect plays an important role in supply chain management especially in a highly volatile market where prices change due to many unexpected reasons brought about by different phenomenon such as global warming. traditionally, one may expect a reduction on demand when there is a significant move on market price. however, the recent changes on global economy imply that the demand for ...

Both international and domestic developments have combined to bring the corporate governance (CG) debate to the fore in Turkey. On one hand, the CG debate at the international level had a ‘pull’ effect. It has drawn the attention of Turkish companies and policy-makers to the linkage between CG quality and sustainable development. On the other hand, domestic realities such as limited foreign dir...

generally, high oil prices slow economic growth, cause inflationary pressures and creates global imbalances. in addition, oil price volatility increase uncertainty and restrain the much-needed investment in the capital market. thus, this paper applies the augmented dickey fuller and johansen co-integration tests in which the effect of oil price volatility, crude oil price and stock price is ana...

Existing research suggests that market misvaluations affect corporate investment, often leading to suboptimal investment. I examine whether earnings smoothing reduces the impact of market misvaluations on corporate investment and in turn enhances investment efficiency. I find that earnings smoothing has a strong negative effect on the sensitivity of corporate investment to stock prices. Further...