We examine asset prices in a representative-agent model of general equilibrium. Assuming only that individuals are risk averse, we determine conditions on the changes in asset risk that are both necessary and sufficient for the asset price to fall. We show that these conditions neither imply,...

We document the empirical fact that asset prices in the consumption-goods and investment-goods sector behave almost identically in the US economy. In order to derive the cyclical behavior of the equity returns in these two sectors, we consider a standard two-sector real-business cycle model with...

During the 15 years prior to the global financial crisis the volume of securitized assets transacted in the US grew substantially, reflecting a change in the nature of the financial intermediation process. Together with increased securitization of assets, financial entities, who participate more...

The arbitrage pricing theory (APT) attributes differences in expected returns to exposure to systematic risk factors, which are typically assumed to be strong. In this paper we consider two aspects of the APT. Firstly we relate the factors in the statistical factor model to a theoretically...

This paper analyses the short- and long-term effects of geopolitical uncertainty on cross-border portfolio flows between the US and 41 developed and emerging economies over the period January 1992-November 2022. We find that geopolitical uncertainty decreases equity inflows from other countries...

This paper provides evidence on the degree of persistence of one of the key components of the CAPM, namely the market risk premium, as well as its volatility. The analysis applies fractional integration methods to data for the US, Germany and Japan, and for robustness purposes considers...

Because of the uncertainty about how to model the growth process of our economy, there is still much confusion about which discount rates should be used to evaluate actions having long-lasting impacts, as in the contexts of climate change, social security reforms or large public infrastructures...

How should one evaluate investment projects whose CCAPM betas are uncertain? This question is particularly crucial for projects yielding long-lasting impacts on the economy, as is the case for example for many green investments. We define the notion of a certainty equivalent beta. We show that...

Overall, 72 subjects invest their endowment in four risky assets. Each com-bination of assets yields the same expected return and variance of returns. Illusion of expertise prevails when one prefers nevertheless the self-selected portfolio. After being randomly assigned to groups of four...

This paper explores French assets returns predictability within a VAR setup. Using quarterly data from 1970Q4 to 2006Q4, it turns out that bonds, equities and bills returns are actually predictable. This feature implies that the investment horizon does indeed matter in the asset allocation. The...