This paper shows that non-linearities can generate time-varying and asymmetric risk premia over the business cycle. These (empirical) key features become relevant and asset market implications improve substantially when we allow for non-normalities in the form of rare disasters. We employ...

We propose a simple and powerful method for determining the transition process in continuous-time DSGE models under Poisson uncertainty numerically. The idea is to transform the system of stochastic differential equations into a system of functional differential equations of the retarded type....

This paper shows that the consumption-based asset pricing model (C-CAPM) with low-probability disaster risk rationalizes large pricing errors, i.e. Euler equation errors. This result is remarkable, since Lettau and Ludvigson (2009) show that leading asset pricing models cannot explain sizeable...

The present paper tests for the existence of multicointegration between real per capita private consumption expenditure and real per capita disposable personal income in the USA. In doing so, we exploit the fact that the flows of disposable income and consumption expenditure on the one hand, and...

The AEL consists of empirical macro studies of the effects of development aid. At the end of 2004 it had reached 97 studies of three families, which we have summarized in one study each using meta-analysis. Studies of the effect on investments show that they rise by 1/3 of the aid – the rest...

On an international post World War II dataset, we use an iterated GMM pro- cedure to estimate and test the Campbell-Cochrane (1999) habit formation model. In addition, we analyze the predictive power of the surplus consumption ratio for future asset returns. We find that, although there are...

The AEL (aid effectiveness literature) studies the macroeconomic effect of development aid using cross-country or panel data econo¬metrics. It contains about 100 papers of which 43 study whether development aid increases accumulation in the recipient country. Taking all 43 aid-accumulation...

When the consumption growth rate is measured based upon fourth quarter data, it tracks predictable variation in future excess stock returns. Low fourth quarter consumption growth rates predict high future excess stock returns such that expected returns are high at business cycle troughs and low...

A unique data set enables us to test the hypothesis that more economists than otherwise identical investors hold stocks due to informational advantages. We confirm that economists have a significantly higher probability of participating in the stock market than investors with any other...

We investigate the long-run stock-bond correlation using a novel model that combines the dynamic conditional correlation model with the mixed-data sampling approach. The long-run correlation is affected by both macro-finance variables (historical and forecasts) and the lagged realized...