Based on individual expectations from the Survey of Professional Forecasters, we construct a realtime proxy for expected term premium changes on long-term bonds. We empirically investigate the relation of these bond term premium expectations with expectations about key macroeconomic variables as...

In an incomplete market setting with heterogeneous prior beliefs, we show that public information can have a substantial impact on the ex ante cost of capital, trading volume, and investor welfare. In a model with exponential utility investors and an asset with a normally distributed dividend,...

In an incomplete market setting with heterogeneous prior beliefs, I show that public information and strike price of option have substantial infl?uence on asset pricing in option markets, by investigating an absolute option pricing model with negative exponential utility investors and normally...

In a framework of heterogeneous beliefs, I investigate a two-date consumption model with continuous trading over the interval [0; T], in which information on the aggregate consumption at time T is revealed by an Ornstein-Uhlenbeck Bridge. This information structure allows investors to speculate...

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...

In this paper we show that the long-run stock and bond volatility and the long-run stock-bond correlation depend on macroeconomic uncertainty. We use the mixed data sampling (MIDAS) econometric approach. The findings are in accordance with the flight-to-quality phenomenon when macroeconomic...

The literature on excess return prediction has considered a wide array of estimation schemes, among them unrestricted and restricted regression coefficients. We consider bootstrap aggregation (bagging) to smooth parameter restrictions. Two types of restrictions are considered: positivity of the...

Following Diebold and Li (2006), we use the Nelson-Siegel (NS, 1987) yield curve factors. However the NS yield curve factors are not supervised for a specifi?c forecast target in the sense that the same factors are used for forecasting different variables, e.g., output growth or infl?ation. We...

This paper shows how a standard DSGE model can be extended to reproduce the dynamics in the 10 year yield curve for the post-war US economy with a similar degree of precision as in reduced form term structure models. At the same time, we are able to reproduce the dynamics of four key macro...

This paper studies how non-Gaussian shocks affect risk premia in DSGE models approximated to second and third order. Based on an extension of the results in Schmitt-Grohé & Uribe (2004) to third order, we derive propositions for how rare disasters, stochastic volatility, and GARCH affect any...