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We jointly re-specify the relative purchasing power parity (RPPP) and uncovered interest rate parity (UIP) conditions as the (log) ratio of stochastic discount factors by inverting the market price of risk formula. Our empirical model provides new insights, which show that violations to UIP and RPPP both stem from the existence of a risk premium in exchange rates and from observed market return differentials being a noisy statistic of the markets' expected return differentials in our re-specified model. Using an integrated macro-microstructure framework for expected market return differentials improves our model fit and the validity of UIP and RPPP.

This study examines the behavior of the forward market for foreign exchange for the British pound and the Japanese yen during the turbulent Gulf War period of 1990. The bivariate Engle-Granger technique in conjunction with a time-related dummy variable is used. The study supports market efficiency for both exchange rates, only after five weeks around the invasion week are excluded. Finally, an endogeneously determined structural break is found around the invasion week of the War.

This study examines the impact of international acquisitions on the shareholder wealth of both acquiring and acquired firms, and compares it with that of domestic acquisitions. The results indicate significant differences—bidders in domestic acquisitions lose a statistically significant 0.39 percent, while bidders in international acquisitions do not lose, which supports the diversification motive for foreign expansion. Further, in terms of dollar values, unlike their domestic counterparts, international acquisitions are net wealth creating activities and the division of gains between bidders and targets are more equitable. A cross-sectional analysis of the abnormal returns suggests that the extent of controlling interest being acquired and previous presence in the target country both significantly affect the abnormal returns of the bidders and the method of payment significantly affects the abnormal returns for the targets.

In this paper we highlight the salient features of Covered Bonds in relation to MBS, and argue for their introduction to the US market accompanied with the appropriate legislative structure and oversight. The Covered Bond market has the potential of adding significant measure of stability to the banking system while becoming an important source of long-term funding for residential and commercial mortgage loans in the United States.