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Shocks to equity options' ATM implied volatility (ATMIV) are followed by persistently lower short-term rates. Shocks to the ratio of OTM puts' over OTM calls' implied volatilities (P/C) are followed by persistently higher rates. The stock's and Treasury-bond's ATMIV indices, which measure market...
Persistent link: https://www.econbiz.de/10012461893
In this paper we propose a general equilibrium model that successfully reproduces the historical experience of the cross section of US stock prices as well as the realized history of the market portfolio. The model achieves this while addressing traditional concerns in the asset pricing...
Persistent link: https://www.econbiz.de/10012469492
We develop a general equilibrium model of government policy choice in which stock prices respond to political news. The model implies that political uncertainty commands a risk premium whose magnitude is larger in weaker economic conditions. Political uncertainty reduces the value of the...
Persistent link: https://www.econbiz.de/10012461195