This paper analyzes dynamic oligopoly models where investment is the principal strategic variable of interest, there are a large number of investment choices, and there are privately observed shocks to the marginal cost of investment. We show that simulation methods to compute these models can...

We use a large cross-section of equity returns to estimate a rich affine model of equity prices, dividends, returns and their dynamics. Using the model, we price dividend strips of the aggregate market index, as well as any other well-diversified equity portfolio. We do not use any dividend...

We model financial innovations such as Exchange-Traded Funds, smart beta products, and many index-based vehicles as composite securities (CSs) that facilitate trading the common factors in assets' liquidation values. Through accessing a larger basket of assets in endogenously chosen proportions,...

We measure investors' short- and long-term stock-return expectations using both options and survey data. These expectations at different horizons reveal what investors think their own short-term expectations will be in the future, or forward return expectations. While contemporaneous short-term...

This lecture considers the case for consumer financial regulation in an environment where many households lack the knowledge to manage their financial affairs effectively. The lecture argues that financial ignorance is pervasive and unsurprising given the complexity of modern financial products,...

US government bonds are widely considered to be the world's safe store of value. US government bonds are a large fraction of safe asset portfolios, such as the porfolios of many central banks. The world demand for safe assets leads to low yields on US Treasury bonds. During periods of economic...

Financial innovations in recent decades have vastly expanded investors' portfolio choice. We theoretically analyze the effect of these developments on investors' savings and asset returns. In our model, investors with possibly heterogeneous beliefs choose their savings portfolios. Under mild...

A four-factor model with two "mispricing" factors, in addition to market and size factors, accommodates a large set of anomalies better than notable four- and five-factor alternative models. Moreover, our size factor reveals a small-firm premium nearly twice usual estimates. The mispricing...

We develop a model for analyzing the sovereign debt crises of 2010-2013 in the Eurozone. The government sets its expenditure-debt policy optimally. The need to sell large quantities of bonds every period leaves the government vulnerable to self-fulfilling crises in which investors, anticipating...

We model a financial market in which investor beliefs are shaped by representativeness. Investors overreact to a series of good news, because such a series is representative of a good state. A few bad news do not change investor minds because the good state is still representative, but enough...