We provide a comprehensive analysis of the impact of economic and financial globalization on asset return comovements over the past 35 years. Our globalization indicators draw a distinction between de jure openness that results from changes in the regulatory environment and de facto or realized...

We introduce a "bad environment-good environment" (BEGE) technology for consumption growth in a consumption-based asset pricing model with external habit formation. The model generates realistic non-Gaussian features of consumption growth and fits standard salient features of asset prices...

We decompose the squared VIX index, derived from US S&P500 options prices, into the conditional variance of stock returns and the equity variance premium. We evaluate a plethora of state-of-the-art volatility forecasting models to produce an accurate measure of the conditional variance. We then...

We decompose the squared VIX index, derived from US S&P 500 options prices, into the conditional variance of stock returns and the equity variance premium. We evaluate a plethora of state-of-the-art volatility forecasting models to produce an accurate measure of the conditional variance. We then...

Corporate bond returns in the major developed economies increase with risk, as measured by maturity and ratings. From a pricing perspective, we find little to no evidence against the World CAPM model, where the market consists out of equity, sovereign and corporate bonds. However, from a factor...

We study the economic sources of stock-bond return comovements and its time variation using a dynamic factor model. We identify the economic factors employing a semi-structural regime-switching model for state variables such as interest rates, inflation, the output gap, and cash flow growth. We...

We introduce a "bad environment-good environment" technology for consumption growth in a consumption- based asset pricing model. Using the preference structure from Campbell and Cochrane (1999), the model generates realistic time-varying volatility, skewness and kurtosis in fundamentals while...

We present a tractable, linear model for the simultaneous pricing of stock and bond returns that incorporates stochastic risk aversion. In this model, analytic solutions for endogenous stock and bond prices and returns are readily calculated. After estimating the parameters of the model by the...

We examine international stock return comovements using country-industry and country-style portfolios. We first establish that parsimonious risk-based factor models capture the covariance structure of the data better than the popular Heston-Rouwenhorst (1994) model. We then establish the...