This paper introduces bond market order flow as a predictor variable in term structuremodels and provides evidence that order flow has forecasting ability over and above thatof forward rates. Both in-sample and out-of-sample forecasts show that models includ-ing interdealer order flow outperform...

This is study empirically examine the impact of market conditions on credit spreads asmotivated by recently developed structural credit risk models. Using credit default swap(CDS) spreads, we find that, in the time series, average credit spreads are decreasing inGDP growth rate, but increasing...

This paper studies the effects of investors’ heterogeneous beliefs on the trading volume,price volatility, and liquidity of stocks. Following Kurz and Motolese (2008), wepropose a simple theoretical model to show that the equilibrium stock price is linearlyand positively correlated with market...

This paper presents a new method to detect informed trading activities in the options markets.An option trade is identified as informed when it is characterized by an unusual largeincrement in open interest and volume, induces large gains, and is not hedged in the stock market.For the period...

A large part of the current debate on US stock price behaviorconcentrates on the question of whether stock prices are driven byfundamentals or by non-fundamental factors(...)

In this paper, I present a theory of dynamic economic growth, business cycles, and asset pricing that integrates (1) Marx's idea (and emphasized by Klein) of a two-class heterogeneity of the ownership structure of physical capital and human capital in a capitalist society, (2) Keynes' idea of...

What is the fundamental value of a stock? Do stock prices deviate from this fundamental value? If yes, do they go back to their fundamental value? This paper proposes to answer these three questions by using a stock valuation model based on the Consumption-Capital Asset Pricing Model (C-CAPM)...

The large spread between equity returns and risk free rates observed in most stock markets (the "equity premium puzzle") has been subject of intense debates. Two main families of models claim to solve this puzzle: habit formation models and loss aversion models. The goal of this paper is to...

We systematically examine the comparative predictive performance of a number of alternativelinear and non-linear models for stock and bond returns in the G7 countries. Besides Markovswitching, threshold autoregressive (TAR), and smooth transition autoregressive (STAR) regimeswitching...