Reference-dependent preference models assume that agents derive utility from deviations of consumption from benchmark levels, rather than from consumption levels. These references can be either backward-looking (as explicit in the Habit literature) or forward-looking (as implicitly suggested by...

We build a novel macro-finance model that combines a semi-structural macroeconomic module with arbitrage-free yield-curve dynamics. We estimate it for the United States and the euro area using a Bayesian approach and jointly infer the real equilibrium interest rate (r*), trend inflation (π*),...

This paper documents a durable increase in the cross-sectoral dispersion of earnings expectations during the COVID-19 crisis. The rise in dispersion of earnings forecasts can be explained by the introduction of lockdown measures, which had a particularly adverse impact on the travel sector....

After the announcement of the European Central Bank's corporate quantitative easing program, non-financial corporations timed the bond market by shifting their issuance toward bonds eligible for the program. However, issuers of eligible bonds did not increase total issuance compared to other...

We study the information flow from the ECB on policy dates since its inception, using tick data. We show that three factors capture about all of the variation in the yield curve but that these are different factors with different variance shares in the window that contains the policy decision...

We incorporate a latent stochastic volatility factor and macroeconomic expectations in an affine model for the term structure of nominal and real rates. We estimate the model over 1999-2016 on U.S. data for nominal and TIPS yields, the realized and implied volatility of T-bonds and survey...

This paper investigates the relationship between central bank (reverse) auctions and bill market liquidity. The analysis includes data on the purchases of bills in the auctions by the Dutch Central Bank under the European Central Bank's Pandemic Emergency Purchase Programme (PEPP). The results...

US money market funds (MMFs) play an important role in short-term markets as large investors of Treasury bills (T-bills) and repurchase agreements (repos) with banks and the Federal Reserve, some of the world’s safest and most liquid assets. We build a theoretical model in which MMFs’...

We conduct an empirical investigation of the pricing and economic sources of commonality in liquidity in the U.S. REIT market. Taking advantage of the specific characteristics of REITs, we analyze three types of commonality in liquidity: within-asset commonality, cross-asset commonality (with...

This chapter surveys recent econometric methodologies for inference in large dimensional conditional factor models in finance. Changes in the business cycle and asset characteristics induce time variation in factor loadings and risk premia to be accounted for. The growing trend in the use of...