Returns on international equities are characterized by jumps; moreover, these jumps tend to occur at the same time across countries leading to "systemic risk". We capture these stylized facts using a multivariate system of jump-diffusion processes where the arrival of jumps is simultaneous...

Our objective is to identify the trading strategy that would allow an investor to take advantage of "excessive" stock price volatility and "sentiment" fluctuations. We construct a general equilibrium "difference-of-opinion" model of sentiment in which there are two classes of agents, one of...

With transaction costs for trading goods, the nominal exchange rate moves within a band around the nominal purchasing power parity (PPP) value. The authors model the behavior of the band and of the exchange rate within the band. The model explains why there are below-unity slope coefficients in...

The author investigates, in a two-country general equilibrium model, whether a bias in consumption towards domestic goods will necessarily lead to a preference for domestic securities. We develop a model where investors are constrained to consume only from their domestic capital stock and where...

In this paper, we study intertemporal portfolio choice when an investor accounts explicitly for model misspecification. We develop a framework that allows for ambiguity about not just the joint distribution of returns for all stocks in the portfolio, but also for different levels of ambiguity...

The authors examine the effect of segmented commodity markets on the relation between forward future spot exchange rates in a dynamic economy. They calculate the slope coefficient in their theoretical economy from regressing exchange rate changes on forward premia. With reasonable parameter...