This paper provides a closed form solution for the value of a multiple claim insurance contract that is subject to a deductible amount and/or an upper limit on claims. The solution is a time integral of European option prices. The model provides three important insights. First, systematic risk in insurance policies is altered in the presence of deductibles and maximum indemnity levels. Second, idiosyncratic risk affects policy valuation and the required rates of return on underwriting portfolios. Finally, contrary to traditional actuarial intuition, changes in the risk-free interest rate may either increase or reduce policy values.

Many empirical studies find that the distribution of stock returns departs from normality. In such cases, it is desirable to employ a statistical estimation procedure that may be more efficient than ordinary least squares. This paper describes various robust methods, which have attracted increasing attention in the statistical literature, in the context of estimating beta risk. The empirical analysis documents the potential efficiency gains from using robust methods as an alternative to ordinary least squares, based on both simulated and actual returns data.

This paper tests the null hypothesis of no difference in the probability of a trade occurring at the ask using a new database containing intraday bid-ask quotes and transaction prices on both U.S. and Canadian Exchanges. We use LOGIT analysis to test the hypothesis across days of the week, price-stratified portfolios, and times of the day. We find systematic patterns in the probability of a trade at the ask resembling previously documented returns anomalies and conclude that the findings of previous weekend and intraday returns studies may be overstated. The significance of this conclusion substantially increases as one moves from the use of interday to intraday data.

David C. Mauer, Lemma W. Senbet, The Effect of the Secondary Market on the Pricing of Initial Public Offerings: Theory and Evidence, The Journal of Financial and Quantitative Analysis, Vol. 27, No. 1 (Mar., 1992), pp. 55-79

Thomas D. Dowdell, Suresh Govindaraj, Prem C. Jain, The Tylenol Incident, Ensuing Regulation, and Stock Prices, The Journal of Financial and Quantitative Analysis, Vol. 27, No. 2 (Jun., 1992), pp. 283-301

Current literature stresses that efficient funds do not exist when asset returns are continuously distributed. This paper shows that the existence of efficient funds can be restored if security returns are generated by a linear factor model.

In a recent study, Tinic and West (1986) empirically reexamine the risk-return relationship posited by the traditional mean-variance CAPM. They find a positive nonlinear relationship between risk and return, except during January when the market rewards bearing nonsystematic risk. This study examines the hypothesis that nonnormality of return distributions may account for some of these anomalous results. We compare Shalit and Yitzhaki's (1984) mean-extended Gini CAPM—an equilibrium asset pricing relation that is independent of the form of the underlying asset distribution—with the traditional CAPM. Our results indicate that the nonlinear risk-return relationship and the size and January effects are robust to nonnormality of return distributions.