Fiscal foresight -- the phenomenon that legislative and implementation lags ensure that private agents receive clear signals about the tax rates they face in the future -- is intrinsic to the tax policy process. This paper develops an analytical framework to study the econometric implications of...

Forecasts for the two or three years after mid-2014 have converged on growth rates of real GDP in the range of 3.0 to 3.5 percent, a major stepwise increase from realized growth of 2.1 percent between mid-2009 and mid-2014. However, these forecasts are based on the demand for goods and services....

Why do countries find it so hard to get their budget deficits under control? Systematic patterns in the errors that official budget agencies make in their forecasts may play an important role. Although many observers have suggested that fiscal discipline can be restored via fiscal rules such as...

We present an alternative expectation formation mechanism that helps rationalize well known asset pricing anomalies, such as the predictability of excess returns, excess volatility, and the equity-premium puzzle. As with rational expectations (RE), the expectation formation mechanism we consider...

In asset pricing, estimation risk refers to investor uncertainty about the parameters of the return or cashflow process. We show that with estimation risk the observable properties of prices and returns can differ significantly from the properties perceived by rational investors. In particular,...

This paper is an investigation into the determinants of asymmetries in stock returns. We develop a series of cross-sectional regression specifications which attempt to forecast skewness in the daily returns of individual stocks. Negative skewness is most pronounced in stocks that have...

When a rate of return is regressed on a lagged stochastic regressor, such as a dividend yield, the regression disturbance is correlated with the regressor's innovation. The OLS estimator's finite-sample properties, derived here, can depart substantially from the standard regression setting....

We study the performance of many traditional and novel, text-based variables for in-sample and out-of-sample forecasting of oil spot, futures, and energy company stock returns, and changes in oil volatility, production, and inventories. After controlling for small-sample biases, we find evidence...

A linearization of a rational expectations present value model for corporate stock prices produces a simple relation between the log dividend-price ratio and mathematical expectations of future log real dividend changes and future real discount rates. This relation can be tested using vector...