Bianchi, Daniele; Guidolin, Massimo; Ravazzolo, Francesco - Norges Bank - 2013
This paper proposes a Bayesian estimation framework for a typical multi-factor model with time-varying risk exposures to macroeconomic risk factors and corresponding premia to price U.S. stocks and bonds. The model assumes that risk exposures and idiosynchratic volatility follow a break-point...