Recent empirical research on the effects of monetary policy shocks on exchange rate fluctuations have encountered the exchange rate puzzle and th e forward discount bias puzzle.The exchange rate puzzle is the tendency of the domestic currency (of non-US G-7 countries) to depreciate against the...

This paper analyzes a dynamic exchange rate policy game in which the central bank has private information about its short-term exchange rate target, on the one hand, and in which the market is faced with a certain degree of ambiguity concerning the actual intervention volume, on the other....

Risk premia in the consumption capital asset pricing model depend on preferences and dividend. We develop a decomposition which allows a separate treatment of both components. We show that preferences alone determine the risk-return tradeoff measured by the Sharpe-ratio. In general, the...

The equity premium puzzle shows that using standard parameters and setup, the Consumption-based Capital Asset Pricing Model's (CCAPM's) prediction of the premium associated with systematic risk is out by an order of magnitude.The object of this paper is to consider the implications of each of...

Abstract: We analyse daily lead-lag patterns in US equity and credit default swap (CDS) returns. We first document that equity returns robustly lead CDS returns. However, we find that the CDSlag is due to common (and not firm-specific) news and arises predominantly in response to positive...

We use a simple model in which the expected returns in emerging markets depend on their systematic risk as measured by their beta relative to the world portfolio as well as on the level of integration in that market.The level of integration is a time-varying variable that depends on the market...

This paper quantifies the magnitude and time-varying nature of volatility spillovers from the aggregate European (EU) and US market to 13 local European equity markets.I develop a shock spillover model that decomposes local unexpected returns into a country speciffic shock, a regional European...

In this paper we study value strategies for four European countries (France, Germany, the Netherlands and the United Kingdom).We find an outperformance for all four value variables which are investigated: the earnings-to-price (E/P) ratio, the cash-flow-to-price (CF/P) ratio, the book-to-market...

In this paper we estimate and interpret the factors that jointly determine bond returns of different maturities in the US, Germany and Japan.We analyze both currency-hedged and unhedged bond returns.For currency-hedged bond returns, we find that five factors explain 96.5% of the variation of...