This paper decomposes nominal Treasury yields into expected real rates, expected inflation rates, real risk premiums, and inflation risk premiums by separately calibrating a three-factor affine term structure model to the nominal Treasury and TIPS yield curves. Although this particular...

This paper examines the first three moments of investors' expectations for the housing sector. That is, first, what do financial markets imply about expected future home prices? Second, how much confidence do investors have in their forecast? And, third, do market participants see more downside...

Affine term structure models in which the short rate follows a jump-diffusion process are difficult to solve, and the parameters of such models are hard to estimate. Without analytical answers to the partial difference differential equation (PDDE) for bond prices implied by jump-diffusion...

Recent research suggests a persistent empirical relation between U.S. monetary policy and stock returns since the mid-1980s. The findings seem questionable and incomplete, however, for at least three reasons. First, the results are sensitive to sample selection. Second, this research does not...

Some studies have argued that monetary policy affects stock market performance over monthly or quarterly horizons, which has important implications for both investors and central bankers. Previous findings, however, are not robust to the sensitivity analysis reported here. For example, division...

The skew, irrespective of the mean and variance, of investors' interest rate expectations may affect required bond yields over expected short rates. Indeed, evidence suggests that the near-term skew of the option-implied distribution of expected short-term interest rates correlates with...

This paper examines estimates of the term premium on federal funds futures rates, with a focus on near-dated contracts and therefore the more immediate policy horizon. The first set of methods assumes that the term premium is constant over time. Under this framework, calculations that use survey...

This study pursues two addenda to the practitioner and academic literature on the effect of monetary policy on asset prices. First, this paper applies cointegration theory and, second, relaxes the stringent assumption in the literature that changes in 10-year Treasury yields, stock returns, and...

Several empirical studies report violations of the asset-pricing model of Sharpe (1964), Lintner (1965), and Black (1972). But, there is no consensus on specification in this literature, as such studies typically consider only a limited number of explanatory variables and do not satisfactorily...

Several studies report an empirical link between changes in monetary policy and short- as well as long-run stock market performance in the United States. Such findings are germane both to the study of market anomalies and to monetary policy transmission mechanisms. Previous univariate...