Journal articleAmerican Economic Review · June 1, 2026
This paper develops an asset market-based test for preference for the timing of resolution of uncertainty. Our main theorem provides a characterization of preference for early resolution of uncertainty in terms of the risk premium realized during the perio ...
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Journal articleReview 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 ...
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Journal articleJournal 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 ...
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Journal articleEconometrica · 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 ...
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Journal articleJournal 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, ...
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Journal articleReview 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 ...
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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 ...
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Journal articleReview 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 ...
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Journal articleJournal 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 ...
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Journal articleReview 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 ...
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Journal articleReview 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) ...
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Journal articleFederal 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 ...
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Journal articleJournal 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 ...
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Journal articleEuropean 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 ...
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Journal articleJournal 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 t ...
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Journal articleJournal 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 ...
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Journal articleJournal 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 ...
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Journal articleJournal 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 ...
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Journal articleJournal 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 ...
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Journal articleJournal 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 ...
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Journal articleReview 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 ...
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Journal articleMacroeconomic 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 ...
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Journal articleJournal 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 ...
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Journal articleJournal 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 ...
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Journal articleJournal 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 ...
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Journal articleJournal 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 ...
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