The long-run risks (LRR) asset pricing model emphasizes the role of low-frequency movements in expected growth and economic uncertainty, along with investor preferences for early resolution of uncertainty, as an important economic-channel that determines asset prices. In this paper, we estimate...

We document that value-to-price, the ratio of Residual-Income-Model-based valuation to market price, subsumes the power of book-to-market ratio and many other value or quality measures in predicting stock returns. Long-short value-to-price portfolios hedge against momentum, revitalize the...

We study sources and implications of undiversified portfolios in a production-based asset pricing model with financial frictions. Households take concentrated positions in a single firm exposed to idiosyncratic shocks because managerial effort requires equity stakes, and because investors gain...

We explore the macro/finance interface in the context of equity markets. In particular, using half a century of Livingston expected business conditions data we characterize directly the impact of expected business conditions on expected excess stock returns. Expected business conditions...

This article takes a critical look at the literature on equity premium puzzle - the inability of standard intertemporal economic models to rationalize the statistics that have characterized U.S. financial markets over the past century. A summary of historical returns for the United States and...

This paper characterizes, interprets, and tests the over-identifying restrictions imposed in affine models of the term" structure. Letting r(t) = ë Y(t), where Y is an unobserved vector affine process, our analysis proceeds in three steps. First, we show that affine models can be categorized...

Volatility permeates modern financial theories and decision making processes. As such, accurate measures and good forecasts of future volatility are critical for the implementation and evaluation of asset pricing theories. In response to this, a voluminous literature has emerged for modeling the...