disturbances - an increase in risk, and a slowing of productivity growth - each of which might rationalize a simultaneous drop in … increase in risk depresses the return on riskless bonds. When all of the wealth of the economy is traded in the stock market …, equity values fall with increasing equity risk only if the intertemporal elasticity of substitution in consumption exceeds …

foreign real bonds. Bonds matter: in equilibrium, investors structure their bond portfolio to hedge real exchange rate risk … against other sources of risk, conditionally on bond returns. We estimate the optimal equity and bond portfolios implied by … share of the equity home bias and obtain a currency exposure of bond portfolios comparable to the data …

international macroeconomic risk sharing than is possible today. Retail institutions are described that might develop around such … markets and help the public with their risk management. However, the establishment of such markets would also incur the risk …

coexistence of positive bond risk premiums and the negative stock-bond return correlation. We show that two distinctive shocks … positive bond risk premiums are driven by the same technology shock … stylized facts: (1) the positive stock-bond return correlation from 1971 to 2000 and the negative one after 2000, (2) the …

We propose an approach to identifying economic shocks (monetary, growth, and risk-premium news) from stock returns and … risk-premium shocks--time-varying compensation for discount-rate and cash-flow news--which have distinct effects on stocks … and bonds. Since the mid-1990s, the Fed-induced reductions in both risk premium sources have generated high average stock …

We study the economic sources of stock-bond return comovements and its time variation using a dynamic factor model. We …, inflation, the output gap, and cash flow growth. We also view risk aversion, uncertainty about inflation and output, and … stock and bond return correlations, but that other factors, especially liquidity proxies, play a more important role. The …

when the investor has access to nominal bonds and a stock portfolio. In the presence of unhedgeable inflation risk, there … exist multiple pricing kernels that produce the same bond prices, but a unique pricing kernel equal to the marginal utility … of the investor. We apply our method to a three-factor Gaussian model with a time-varying price of risk that captures the …

of taxable interest income to basis. To deal with the risk aspect of the problem (lock-in and cherry picking) requires …

endowment risk, the size of such clienteles determines whether the portfolio for a liquidity trader consists of a clientele …