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Ravi Bansal

J.B. Fuqua Distinguished Professor of Business Administration
Fuqua School of Business
Box 90120, Durham, NC 27708-0120
216F Fuqua Sch of Bus, Durham, NC 27708

Selected Publications


Socially Responsible Investing in Good and Bad Times

Journal Article Review of Financial Studies · April 1, 2022 We investigate the time variability of abnormal returns from socially responsible investing (SRI). Using portfolio regressions and event studies on multiple data sources, including analyst ratings, firm announcements, and realized incidents, we find that h ... Full text Cite

The term structure of equity risk premia

Journal Article Journal of Financial Economics · December 1, 2021 We estimate a regime-switching model for the equity term structure with Bayesian methods. Our approach accounts for the data sample being unrepresentative of the population distribution of regimes. We find that (i) the term structure of expected equity div ... Full text Cite

Risk Preferences and the Macroeconomic Announcement Premium

Journal Article Econometrica · January 1, 2018 This paper develops a revealed preference theory for the equity premium around macroeconomic announcements. Stock returns realized around pre-scheduled macroeconomic announcements, such as the employment report and the FOMC statements, account for 55% of t ... Full text Cite

Risks for the long run: Estimation with time aggregation

Scholarly Edition · September 1, 2016 The discrepancy between the decision and data-sampling intervals, known as time aggregation, confounds the identification of long-, short-run growth, and volatility risks in asset prices. This paper develops a method to simultaneously estimate the model pa ... Full text Cite

Volatility, the Macroeconomy, and Asset Prices

Journal Article Journal of Finance · December 1, 2014 How important are volatility fluctuations for asset prices and the macroeconomy? We find that an increase in macroeconomic volatility is associated with an increase in discount rates and a decline in consumption. We develop a framework in which cash flow, ... Full text Cite

A long-run risks explanation of predictability puzzles in bond and currency markets

Journal Article Review of Financial Studies · January 1, 2013 We show that bond risk premia rise with uncertainty about expected inflation and fall with uncertainty about expected growth; the magnitude of return predictability using these uncertainty measures is similar to that by multiple yields. Motivated by this e ... Full text Cite

An Empirical Evaluation of the Long-Run Risks Model for Asset Prices

Journal Article · January 2012 We provide an empirical evaluation of the Long-Run Risks (LRR) model, and highlight important differences in the asset pricing implications of the LRR model relative to the habit model. We feature three key results: (i) consistent with the LRR model there ... Cite

Learning and asset-price jumps

Journal Article Review of Financial Studies · August 1, 2011 We develop a general equilibrium model in which income and dividends are smooth but asset prices contain large moves (jumps). These large price jumps are triggered by optimal decisions of investors to learn the unobserved state. We show that learning choic ... Full text Cite

Cointegration and long-run asset allocation

Journal Article Journal of Business and Economic Statistics · January 1, 2011 We show that economic restrictions of cointegration between asset cash flows and aggregate consumption have important implications for return dynamics and optimal portfolio rules, particularly at long investment horizons. When cash flows and consumption sh ... Full text Cite

Long run risks, the macroeconomy, and asset prices

Journal Article American Economic Review · May 1, 2010 Full text Open Access Cite

Confidence risk and asset prices

Journal Article American Economic Review · May 1, 2010 Full text Open Access Cite

Cointegration and consumption risks in asset returns

Journal Article Review of Financial Studies · March 1, 2009 We argue that the cointegrating relation between dividends and consumption, a measure of long-run consumption risks, is a key determinant of risk premia at all investment horizons. As the investment horizon increases, transitory risks disappear, and the as ... Full text Cite

Rational pessimism, rational exuberance, and asset pricing models

Journal Article Review of Economic Studies · 2007 The paper estimates and examines the empirical plausibility of asset pricing models that attempt to explain features of financial markets such as the size of the equity premium and the volatility of the stock market. In one model, the long-run risks (LRR) ... Full text Open Access Cite

Long-run risks and financial markets

Journal Article Federal Reserve Bank of St. Louis Review · January 1, 2007 The recently developed long-run risks asset pricing model shows that concerns about long-run expected growth and time-varying uncertainty (i.e., volatility) about future economic prospects drive asset prices. These two channels of economic risks can accoun ... Full text Cite

Consumption, dividends, and the cross section of equity returns

Journal Article Journal of Finance · August 1, 2005 We show that aggregate consumption risks embodied in cash flows can account for the puzzling differences in risk premia across book-to-market, momentum, and size-sorted portfolios. The dynamics of aggregate consumption and cash flow growth rates, modeled a ... Full text Cite

Interpretable asset markets?

Journal Article European Economic Review · April 1, 2005 In this paper we show that measures of economic uncertainty (conditional volatility of consumption) predict and are predicted by valuation ratios at long horizons. Further we document that asset valuations drop as economic uncertainty rises-that is, financ ... Full text Cite

Regime shifts, risk premiums in the term structure, and the business cycle

Journal Article Journal of Business and Economic Statistics · October 1, 2004 Recent evidence indicates that using multiple forward rates sharply predicts future excess returns on U.S. Treasury Bonds, with the R2's being around 30%. The projection coefficients in these regressions exhibit a distinct pattern that relates to the matur ... Full text Cite

Risks for the long run: A potential resolution of asset pricing puzzles

Journal Article Journal of Finance · August 1, 2004 We model consumption and dividend growth rates as containing (1) a small longrun predictable component, and (2) fluctuating economic uncertainty (consumption volatility). These dynamics, for which we provide empirical support, in conjunction with Epstein a ... Full text Cite

Socially Responsible Investing in Good and Bad Times

Journal Article Review of Financial Studies · April 1, 2022 We investigate the time variability of abnormal returns from socially responsible investing (SRI). Using portfolio regressions and event studies on multiple data sources, including analyst ratings, firm announcements, and realized incidents, we find that h ... Full text Cite

The term structure of equity risk premia

Journal Article Journal of Financial Economics · December 1, 2021 We estimate a regime-switching model for the equity term structure with Bayesian methods. Our approach accounts for the data sample being unrepresentative of the population distribution of regimes. We find that (i) the term structure of expected equity div ... Full text Cite

Risk Preferences and the Macroeconomic Announcement Premium

Journal Article Econometrica · January 1, 2018 This paper develops a revealed preference theory for the equity premium around macroeconomic announcements. Stock returns realized around pre-scheduled macroeconomic announcements, such as the employment report and the FOMC statements, account for 55% of t ... Full text Cite

Risks for the long run: Estimation with time aggregation

Scholarly Edition · September 1, 2016 The discrepancy between the decision and data-sampling intervals, known as time aggregation, confounds the identification of long-, short-run growth, and volatility risks in asset prices. This paper develops a method to simultaneously estimate the model pa ... Full text Cite

Volatility, the Macroeconomy, and Asset Prices

Journal Article Journal of Finance · December 1, 2014 How important are volatility fluctuations for asset prices and the macroeconomy? We find that an increase in macroeconomic volatility is associated with an increase in discount rates and a decline in consumption. We develop a framework in which cash flow, ... Full text Cite

A long-run risks explanation of predictability puzzles in bond and currency markets

Journal Article Review of Financial Studies · January 1, 2013 We show that bond risk premia rise with uncertainty about expected inflation and fall with uncertainty about expected growth; the magnitude of return predictability using these uncertainty measures is similar to that by multiple yields. Motivated by this e ... Full text Cite

An Empirical Evaluation of the Long-Run Risks Model for Asset Prices

Journal Article · January 2012 We provide an empirical evaluation of the Long-Run Risks (LRR) model, and highlight important differences in the asset pricing implications of the LRR model relative to the habit model. We feature three key results: (i) consistent with the LRR model there ... Cite

Learning and asset-price jumps

Journal Article Review of Financial Studies · August 1, 2011 We develop a general equilibrium model in which income and dividends are smooth but asset prices contain large moves (jumps). These large price jumps are triggered by optimal decisions of investors to learn the unobserved state. We show that learning choic ... Full text Cite

Cointegration and long-run asset allocation

Journal Article Journal of Business and Economic Statistics · January 1, 2011 We show that economic restrictions of cointegration between asset cash flows and aggregate consumption have important implications for return dynamics and optimal portfolio rules, particularly at long investment horizons. When cash flows and consumption sh ... Full text Cite

Long run risks, the macroeconomy, and asset prices

Journal Article American Economic Review · May 1, 2010 Full text Open Access Cite

Confidence risk and asset prices

Journal Article American Economic Review · May 1, 2010 Full text Open Access Cite

Cointegration and consumption risks in asset returns

Journal Article Review of Financial Studies · March 1, 2009 We argue that the cointegrating relation between dividends and consumption, a measure of long-run consumption risks, is a key determinant of risk premia at all investment horizons. As the investment horizon increases, transitory risks disappear, and the as ... Full text Cite

Rational pessimism, rational exuberance, and asset pricing models

Journal Article Review of Economic Studies · 2007 The paper estimates and examines the empirical plausibility of asset pricing models that attempt to explain features of financial markets such as the size of the equity premium and the volatility of the stock market. In one model, the long-run risks (LRR) ... Full text Open Access Cite

Long-run risks and financial markets

Journal Article Federal Reserve Bank of St. Louis Review · January 1, 2007 The recently developed long-run risks asset pricing model shows that concerns about long-run expected growth and time-varying uncertainty (i.e., volatility) about future economic prospects drive asset prices. These two channels of economic risks can accoun ... Full text Cite

Consumption, dividends, and the cross section of equity returns

Journal Article Journal of Finance · August 1, 2005 We show that aggregate consumption risks embodied in cash flows can account for the puzzling differences in risk premia across book-to-market, momentum, and size-sorted portfolios. The dynamics of aggregate consumption and cash flow growth rates, modeled a ... Full text Cite

Interpretable asset markets?

Journal Article European Economic Review · April 1, 2005 In this paper we show that measures of economic uncertainty (conditional volatility of consumption) predict and are predicted by valuation ratios at long horizons. Further we document that asset valuations drop as economic uncertainty rises-that is, financ ... Full text Cite

Regime shifts, risk premiums in the term structure, and the business cycle

Journal Article Journal of Business and Economic Statistics · October 1, 2004 Recent evidence indicates that using multiple forward rates sharply predicts future excess returns on U.S. Treasury Bonds, with the R2's being around 30%. The projection coefficients in these regressions exhibit a distinct pattern that relates to the matur ... Full text Cite

Risks for the long run: A potential resolution of asset pricing puzzles

Journal Article Journal of Finance · August 1, 2004 We model consumption and dividend growth rates as containing (1) a small longrun predictable component, and (2) fluctuating economic uncertainty (consumption volatility). These dynamics, for which we provide empirical support, in conjunction with Epstein a ... Full text Cite

Introduction: Macroeconomic implications of capital flows in a global economy

Journal Article Journal of Economic Theory · January 1, 2004 The papers in this volume address issues raised by the wave of financial crises that hit emerging markets since the mid 1990s. Several of the papers examine the role that different credit market frictions may have played in triggering the crises, or in det ... Full text Cite

Market efficiency, asset returns, and the size of the risk premium in global equity markets

Journal Article Journal of Econometrics · August 1, 2002 An important economic insight is that observed equity prices must equal the present value of the cash flows associated with the equity claim. An implication of this insight is that present values of cash flows must also quantitatively justify the observed ... Full text Cite

Term structure of interest rates with regime shifts

Journal Article Journal of Finance · January 1, 2002 We develop a term structure model where the short interest rate and the market price of risks are subject to discrete regime shifts. Empirical evidence from efficient method of moments estimation provides considerable support for the regime shifts model. S ... Full text Cite

The forward premium puzzle: Different tales from developed and emerging economies

Journal Article Journal of International Economics · January 1, 2000 In this paper we document new results regarding the forward premium puzzle. The often found negative correlation between the expected currency depreciation and interest rate differential is, contrary to popular belief, not a pervasive phenomenon. It is con ... Full text Cite

An exploration of the forward premium puzzle in currency markets

Journal Article Review of Financial Studies · January 1, 1997 A standard empirical finding is that expected changes in exchange rates and interest rate differentials across countries are negatively related, implying that uncovered interest rate parity is violated in the data. This article provides new empirical evide ... Full text Cite

Growth-optimal portfolio restrictions on asset pricing models

Journal Article Macroeconomic Dynamics · January 1, 1997 We show that absence of arbitrage in frictionless markets implies a lower bound on the average of the logarithm of the reciprocal of the stochastic discount factor implicit in asset pricing models. The greatest lower bound for a given asset menu is the ave ... Full text Cite

A monetary explanation of the equity premium, term premium, and risk-free rate puzzles

Journal Article Journal of Political Economy · January 1, 1996 This paper develops and estimates a monetary model that offers an explanation of some puzzling features of observed returns on equities and default-free bonds. The key feature of the model is that some assets other than money play a special role in facilit ... Full text Cite

Nonparametric estimation of structural models for high-frequency currency market data

Journal Article Journal of Econometrics · January 1, 1995 Empirical modeling of high-frequency currency market data reveals substantial evidence for nonnormality, stochastic volatility, and other nonlinearities. This paper investigates whether an equilibrium monetary model can account for nonlinearities in weekly ... Full text Open Access Cite

No Arbitrage and Arbitrage Pricing: A New Approach

Journal Article The Journal of Finance · January 1, 1993 We argue that arbitrage‐pricing theories (APT) imply the existence of a low‐dimensional nonnegative nonlinear pricing kernel. In contrast to standard constructs of the APT, we do not assume a linear factor structure on the payoffs. This allows us to price ... Full text Cite

A New Approach to International Arbitrage Pricing

Journal Article The Journal of Finance · January 1, 1993 This paper uses a nonlinear arbitrage‐pricing model, a conditional linear model, and an unconditional linear model to price international equities, bonds, and forward currency contracts. Unlike linear models, the nonlinear arbitrage‐pricing model requires ... Full text Cite