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For fixed income investment, the preponderant risk is the clustering of defaults in the portfolio. Accurate prediction of such clustering depends on the knowledge of default correlation. We develop...

We examine the relation between capital structure decision and the incentive power of executive compensation that contains both cash and equity components. Our analytical model shows that executive...

For a well-diversified bond portfolio, default risk over the investment horizon is known as the major risk and the risk is largely from correlated defaults. While plenty of theoretical work about d...

Stigma has negative consequences for quality of life and HIV care outcomes. PositiveLinks is a mobile health intervention that includes a secure anonymous community message board (CMB). We investigated discussion of stigma and changes in stigma scores. Of 77 participants in our pilot, 63% were male, 49% Black, and 72% had incomes below the federal poverty level. Twenty-one percent of CMB posts (394/1834) contained stigma-related content including negative (experiencing stigma) and positive (overcoming stigma) posts addressing intrapersonal and interpersonal stigma. Higher baseline stigma was positively correlated with stress and negatively correlated with HIV care self-efficacy. 12-month data showed a trend toward more improved stigma scores for posters on the CMB versus non-posters (− 4.5 vs − 0.63) and for posters of stigma-related content versus other content (− 5.1 vs − 3.3). Preliminary evidence suggests that a supportive virtual community, accessed through a clinic-affiliated smartphone app, can help people living with HIV to address stigma.

In this study, we intend to reveal some problems with the classic valuation method – the weighted average cost of capital (WACC) method. We first address a fundamental question about WACC, that is, should WACC be interpreted as a spot rate, a forward rate or any kind of average of either of them? We show that the nature of WACC is the expected forward rate. We next demonstrate that without understanding this nature, we may misinterpret the famous MM formula and MM Proposition II, as well as develop incorrect valuation framework. Our findings provide insightful implications to academia and practitioners for the proper interpretation and implementation of the WACC method.

This paper puts forward a capital structure model that incorporates the impacts of dividend policy and personal taxes that are commonly ignored by the existing capital structure models. The results show that paying dividends can reduce the tax benefits from issuing debts, which explains why existing capital structure models commonly overestimate leverage ratios. The results further show that as dividend payout increases, leverage ratios and credit spreads increase too. By incorporating the impacts of dividend policy and personal taxes, the capital structure model established in this paper can generate wide range of leverage ratios and credit spreads, which are consistent with what are observed in the real world.

The equivalent annual cost (EAC) method is a useful tool in asset pricing, lease financing and corporate investment. It deals with projects with different economic lives and has wide applications in many fields outside the finance or even business. However, the important EAC concept and its applications are not always very well understood even within the finance academia. There are a few misunderstandings surrounding 1this widely taught and practiced methodology as evidenced by our experience with finance professionals over the past decades and the lack of clarity in all the mainstream textbooks we have surveyed. One of them is the misconception that the EAC method requires infinite time horizon and infinite repetitions of the identical project or equipment. Given its importance and wide application, the finance profession has an obligation to serve well its gatekeeper role by not overlooking these misconceptions. Thus far, no one has raised and addressed these misconceptions. We fill in this void by explicitly revealing, explaining and addressing these misconceptions. Specifically, we argue that infinite horizon is a convenience but not a necessity by showing how the method can be used for projects or assets with finite horizons and what cautions one has to take. We also provide threads for future studies along this line. Our work makes a marginal contribution the finance theory, pedagogy and practice.