A reduction in inflation can fuel run-ups in housing prices if people suffer from money illusion. For example, investors who decide whether to rent or buy a house by simply comparing monthly rent and mortgage payments do not take into account that inflation lowers future real mortgage costs. We...

A reduction in inflation can fuel run-ups in housing prices if people suffer from money illusion. For example, investors who decide whether to rent or buy a house by simply comparing monthly rent and mortgage payments do not take into account that inflation lowers future real mortgage costs. We...

This paper evaluates the central insight of the Consumption Capital Asset Pricing Model (CCAPM) that an asset's expected return is determined by its equilibrium risk to consumption. Rather than measure the risk of a portfolio by the contemporaneous covariance of its return and consumption growth...

This paper evaluates the central insight of the Consumption Capital Asset Pricing Model (C-CAPM) that an asset's expected return is determined by its equilibrium risk to consumption. Rather that measure the risk of a portfolio by the contemporaneous covariance of its return and consumption...

This paper evaluates the central insight of the consumption capital asset pricing model that an asset's expected return is determined by its equilibrium risk to consumption. Rather than measure risk by the contemporaneous covariance of an asset's return and consumption growth, we measure risk by...

We model banks’ liquidity holding decision as a simultaneous game on an interbank borrowing network. We show that at the Nash equilibrium, the contributions of each bank to the network liquidity level and liquidity risk are distinct functions of its indegree and outdegree Katz-Bonacich...

We study a broad class of asset pricing models in which the stochastic discount factor (SDF) can be factorized into an observable component and a potentially unobservable, model-specific, one. Exploiting this decomposition we derive new entropy bounds that restrict the admissible regions for the...