Macroeconomic models that are based on either the rational expectations hypothesis (REH) or behavioral considerations share a core premise: All future market outcomes can be characterized ex ante with a single overarching probability distribution. This paper assesses the empirical relevance of...

Using bottom-up information from corporate financial statements, we examine the relation between aggregate investment, future equity returns, and investor sentiment. Consistent with the business cycle literature, corporate investments peak during periods of positive sentiment, yet these periods...

This paper studies the influence of macroeconomic fundamentals and the underlying 10years Greek government bonds. We examine for the period between Q12001 up to end to Q42012, applying four major macroeconomic variables such as Debt to GDP ratio, deficit, inflation and unemployment. We found...

Existing literature continues to be unable to offer a convincing explanation for the volatility of the stochastic discount factor in real world data. Our work provides such an explanation. We do not rely on frictions, market in completeness or transactions costs of any kind. Instead, we modify a...

The Fed model postulates that the dividend or earnings yield on stocks should equal the yield on nominal Treasury bonds, or at least that the two should be highly correlated. In US data, there is indeed a strikingly high time series correlation between the yield on nominal bonds and the dividend...

We question a deep-ingrained doctrine in asset pricing: If an empirical characteristic-return relation is consistent with investor "rationality," the relation must be "explained" by a risk factor model. The investment approach changes the big picture of asset pricing. Factors formed on...

Barack Obama’s victory in the 2009 presidential elections in the United States is widely credited to his personal charisma and his extraordinary rhetorical powers, as revealed throughout the campaign. President Obama was inaugurated in the midst of the worst economic crisis in the country,...

We propose a theory of asset prices that emphasizes heterogeneous information as the main element determining prices of different securities. Our main analytical innovation is in formulating a model of noisy information aggregation through asset prices, which is parsimonious and tractable, yet...

Beaudry and Portier (2006) propose an identification scheme to study the effects of news shocks about future productivity in vector error correction models (VECMs). This comment shows that, when applied to their VECMs with more than two variables, the identification scheme does not have a unique...

We estimate an empirical model of consumption disasters using new data on consumption for 24 countries over more than 100 years, and study its implications for asset prices. The model allows for partial recoveries after disasters that unfold over multiple years. We find that roughly half of the...