This paper empirically studies the role of macro-factors in explaining and predicting daily bond yields. In general, macro-finance models use low-frequency data to match with macroeconomic variables available only at low frequencies. To deal with this, we construct and estimate a tractable...

We propose and test novel multifactor models of daily mutual fund performance. To this aim, we set up equity style indices and derive risk factors, which nest the established Fama and French (1992) and Carhart (1997) factors. We add two additional risk factors, namely idiosyncratic risk and...

In the paper we investigate the empirical features of euro area money market turbulence during the recent financial crisis. By means of a novel Fractionally Integrated Heteroskedastic Factor Vector Autoregressive model, we find evidence of a deterministic level factor in the EURIBOR-OIS (OIS)...

This paper proposes an asymmetric kernel-based method for nonparametric estimation of scalar diffusion models of spot interest rates. We derive the asymptotic theory for the asymmetric kernel estimators of the drift and diffusion functions for general and positive recurrent processes and...

This paper applies a new identification approach to estimate the contemporaneous relation between the term structure and monetary policy within a VAR framework. To achieve identification, we combine high-frequency Treasury futures and fed funds futures data with the VAR methodology. Results...

This study contributes to the investigation of the macro-finance interface by assessing the economic content and risk-based interpretation of widely employed risk factors in the specification of empirical asset pricing models, i.e., Fama–French size and value, Carhart momentum, as well as the...

This paper tests a simple market fraction asset pricing model with heterogeneous agents. By selecting a set of structural parameters of the model through a systematic procedure, we show that the autocorrelations (of returns, absolute returns and squared returns) of the market fraction model...

A new model misspecification measure for linear asset pricing models is proposed for the case where misspecification maps to latency of one of the pricing factors; in this case, the market return. This measure is suited both for testing models that include the market return as a pricing factor...

The shape of the term structure of credit default swap (CDS) spreads displays large variations over time and across firms. Consistent with the predictions of structural models of credit risk, we find that the slope of CDS spread term structure increases with firm leverage and volatility, but...

Among 37 methods to reduce transaction costs, we recursively choose the best method for next period's investment in each of three portfolio strategies: levered-momentum, zero-cost momentum, and the equally-weighted market. We identify a few of the best methods and offer a framework by which...