We introduce continuous-time models that capture the salient features of the short-term interest rate and remain tractable for asset pricing applications. We extend classical specifications within and outside of the affine class to multi-factor settings with latent variables that are readily...

The term structure of interest rates is often summarized using a handful of yield factors that capture shifts in the yield curve. Despite their wide application in financial economics, very little is known on the time-series properties of the yield-factor volatilities. We examine three common...

This paper examines empirical issues on asymmetric effects of government spending. Increases in government spending under low real interest rates are not associated with the same increases in future tax liabilities as those under high real interest rates. Consequently, the negative impact from...

This paper proposes a new empirical representation of US inflation expectations in a Stace-Space Markov-Switching framework in order to identify the expectations regimes which are associated with short and long term Phillips curves. Results suggest that the dynamics of in‡ation expectation...

This article studies two extensions of the compound Poisson process with iid Gaussian innovations which are able to characterize important features of high frequency security prices. The first model explicitly accounts for the presence of the bid/ask spread encountered in price-driven markets....

Macroeconomic or financial data are often modelled with cointegration and GARCH. Noticeable examples include those studies of price discovery, in which stock prices of the same underlying asset are cointegrated and they exhibit multivariate GARCH. Modifying the asymptotic theories developed in...

Macroeconomic or financial data are often modelled with cointegration and GARCH. Noticeable examples include those studies of price discovery, in which stock prices of the same underlying asset are cointegrated and they exhibit multivariate GARCH. Modifying the asymptotic theories developed in...

This paper presents a generalized two-step maximum likelihood estimation method for partially identified vector autoregressive models. We suggest a likelihood ratio test for over-identification in a sub-system and derive the asymptotics for impulse responses and forecast-error variance...

The properties and applications of the normal log-normal (NLN) mixture are considered. The moment of the NLN mixture is shown to be finite for any positive order. The expectations of exponential functions of a NLN mixture variable are also investigated. The kurtosis and skewness of the NLN...

In this paper we investigate portfolio coskewness using a quadratic market model as return generating process. It is shown that portfolios of small (large) firms have negative (positive) coskewness with market. An asset pricing model including coskewness is tested through the restrictions it...