In an economy where agents hold money, the short interest rate determines the trade-off between money holdings and consumption. Building on this idea, we develop a theoretical model that shows the transmission mechanism through which the short rate finds its way to stock-return predictability...

When an underlying yields a stochastic dividend yield, derivatives with linear payoff at their maturities that are written on this underlying have the following properties: i) they have a unique price only if markets are complete; ii) the dynamic strategies that replicate these contingent claims...