Entrepreneurs face significant non-diversifiable idiosyncratic business risks. In a dynamic incomplete-markets model of entrepreneurial finance, we show that such risks have important implications for their interdependent consumption/saving, portfolio choice, financing, investment, and endogenous default/cash-out decisions. Even though more risk-averse entrepreneurs default earlier for given de...

This paper estimates the systematic risk of the debt in public leveraged recapitalizations. We calculate this risk as a function of the difference in systematic equity risk before and after the recapitalization. The increase in equity risk is surprisingly small after a recapitalization, ranging from 37% to 57%, depending on the estimation method. If total company risk is unchanged, the implied ...

While a host of economic variables have been identified in the literature with the apparent in-sample ability to predict the equity premium, Goyal and Welch (2007) find that these variables fail to deliver consistent out-of-sample forecast gains relative to the historical average. In this paper, we demonstrate that despite the failure of individual predictive regression model forecasts to outpe...

This paper presents a consumptiun-ba,setl model that explains Ihe equity premitim puzzle through two channels, Hirst, because of borrowing constraints, the sharehokler cannt)t completely diversify his income risk ami requires a sizable risk premium on .stocks. Second, because of limited stock market participation, the precautionary saving demand lowers the risk-free rate but not stock reiurn an...

Multiplicative habit introduces an additional consumption risk as a determinant of equity premium, and allows time preference and habit strength, in addition to risk aversion, to affect “price of risk”. A model combining multiplicative habit and power-expo preferences cannot be rejected.

We examine a class of Brownian based models which produce tractable incomplete equilibria. The models are based on finitely many investors with heterogeneous exponential utilities over intermediate consumption who receive partially unspanned income. The investors can trade continuously on a finite time interval in a money market account as well as a risky security. Besides establishing the exis...

This three-essay thesis focuses on how value of the brand, i.e. brand equity is created, with each study investigating different parts of the relationships within the brand value chain. My first essay identifies and tests a new set of brand equity drivers such as brand structure and positioning, brand strategy, and customer characteristics. I use revenue premium as the retail level measure of b...