We study the economic sources of stock-bond return comovements and its time variation using a dynamic factor model. We … stock and bond return correlations, but that other factors, especially liquidity proxies, play a more important role. The … macro factors are still important in fitting bond return volatility; whereas the "variance premium" is critical in …

explanation for this puzzle is based on prospect theory. Despite its prominence, this explanation has received little formal … scrutiny. We take up this task, and analyze the trading behavior of investors with prospect theory preferences. We find that …, at least for the simplest implementation of prospect theory, the link between these preferences and the disposition …

This paper develops an affine model of the term structure of interest rates in which bond yields are driven by …

foreign real bonds. Bonds matter: in equilibrium, investors structure their bond portfolio to hedge real exchange rate risk … since relative bond returns are strongly correlated with real exchange rate movements. Equity home bias does not arise from … against other sources of risk, conditionally on bond returns. We estimate the optimal equity and bond portfolios implied by …

Using a panel of international government bond data, I construct fixed income portfolios that match the duration of the … dividend strips of the corresponding local aggregate stock market index. I find that these bond portfolios have performed as …

and Titman (1993). We test one such theory--based on the gradual-information-diffusion model of Hong and Stein (1997)--and …

timing skills. In contrast, while a normative theory of stock selection was …