The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Optimum Distribution‐Free Tests and Further Evidence of Heteroscedasticity in the Market Model
Published: 12/01/1982 | DOI: 10.1111/j.1540-6261.1982.tb03616.x
CARMELO GIACCOTTO, MUKHTAR M. ALI
In this paper several powerful distribution‐free tests for heteroscedasticity are introduced and are used to test the hypothesis of constant variance in the market model. These tests are noted for their flexibility in specifying alternative hypotheses. It is found that the assumption of homoscedasticity is untenable for the majority of stocks analyzed. The implications of this finding for the efficient estimation of the parameters of the market model are also discussed.
The Value of Embedded Real Options: Evidence from Consumer Automobile Lease Contracts
Published: 01/11/2007 | DOI: 10.1111/j.1540-6261.2007.01211.x
CARMELO GIACCOTTO, GERSON M. GOLDBERG, SHANTARAM P. HEGDE
Under the common assumption of constant interest rates, we show that penalties for early termination of a lease are often structured in such a way that the cancellation option embedded in consumer automotive leases has little value. Furthermore, our estimates drawn from a sample of three popular car models over 1990 to 2000 indicate that the stand‐alone value of the lease‐end purchase option is, on average, about 16% of the market value of underlying used vehicles, or about $1,462 per contract. Finally, we examine the sensitivity of our option value estimates to model parameters and default risk.