We study the effects of on-the-job skill accumulation on average hours worked by age and the volatility of hours over the life cycle in a calibrated general equilibrium model. Two forms of skill accumulation are considered: learning by doing and on-the-job training. In our economy with learning...

Do financial markets properly reflect leverage? Unlike Gomes and Schmid (2010) who examine this question with a structural approach (using long-term monthly stock characteristics), my paper examines it with a quasi-experimental approach (using short-term a discrete event). After a firm has...

Firm-level stock returns exhibit comovement above that in fundamentals, and the gap tends to be higher in developing countries. We investigate whether correlated beliefs among sophisticated, but imperfectly informed, traders can account for the patterns of return correlations across countries....

We construct a no-arbitrage term structure model with jumps in the entire state vector at deterministic times but of random magnitudes. Jump risk premia are allowed for. We show that the model implies a closed-form representation of yields as a time-inhomogenous affine function of the state...

Despite their strong positive average returns across numerous asset classes, momentum strategies can experience infrequent and persistent strings of negative returns. These momentum crashes are partly forecastable. They occur in "panic" states - following market declines and when market...

We propose a simple framework to assess the costs of nominal price adjustment using stock market returns. We document that, after monetary policy announcements, the conditional volatility rises more for firms with stickier prices than for firms with more flexible prices. This differential...

Short selling, as compared to purchasing, faces greater risks and other potential impediments. This arbitrage asymmetry explains the negative relation between idiosyncratic volatility (IVOL) and average return. The IVOL effect is negative among overpriced stocks but positive among underpriced...

Many leading asset pricing models predict that the term structures of expected returns and volatilities on dividend strips are strongly upward sloping. Yet the empirical evidence suggests otherwise. This discrepancy can be reconciled if these models replace their exogenously specified dividend...

We show that volatility movements have first-order implications for consumption dynamics and asset prices. Volatility news affects the stochastic discount factor and carries a separate risk premium. In the data, volatility risks are persistent and are strongly correlated with discount-rate news....

The leverage effect refers to the generally negative correlation between an asset return and its changes of volatility. A natural estimate consists in using the empirical correlation between the daily returns and the changes of daily volatility estimated from high-frequency data. The puzzle lies...