This Paper studies whether the consumption-based asset-pricing model can explain the cross-section of Sharpe ratios. The constant relative risk aversion (CRRA) model and several extensions (habit persistence, recursive utility and idiosyncratic shocks) all imply that the Sharpe ratio is linearly...

We develop a tactical asset allocation strategy that incorporates the effects of macroeconomic variables. The joint distribution of financial asset returns and the macroeconomic variables is modelled using a VAR with an M-GARCH error structure. As a result the portfolio frontier is time varying...

Should rational agents take into consideration government policy announcements? A skilled agent (an econometrician) could set up a model to combine the following two pieces of information in order to anticipate the future course of fiscal policy in real-time: (i) the ex-ante path of policy as...

There is a broad consensus in the literature that costs of information processing and acquisition may generate costly disagreements in expectations among economic agents, and that central banks may play a central role in reducing such dispersion in expectations. This paper analyses empirically...

This paper challenges the widespread view that forward exchange premia contain little information regarding subsequent spot rate movements. Using weekly dollar/Deutschmark and dollar/sterling data, we show that spot and forward exchange rates are well represented by a vector error correction...

Prediction Markets, sometimes referred to as 'information markets', 'idea futures' or 'event futures', are markets where participants trade contracts whose payoffs are tied to a future event, thereby yielding prices that can be interpreted as market-aggregated forecasts. This article summarizes...