In a Lucas orchard with heterogeneous beliefs, we study the link between market-wide uncertainty, difference of opinionsand co-movement of stock returns. We show that this link plays an important role in explaining the dynamics of equilibriumvolatility and correlation risk premia. In our...

In this paper we question the consensus of using a binary crisisdefinition for empirical crisis models. We believe that the most severeshortcomings of the crisis models today are in the crisis definition rather than the explanatory variables ...

This paper uses statistical model selection criteria and Avramov’s (2002)Bayesian model averaging approach to analyze the sample evidence onstock market predictability in the presence of model uncertainty. Basedon Swiss stock market data, our posterior analysis finds that neither thecumulative...

This paper examines how the evidence of stock market predictability affectsoptimal portfolio choice for buy-and-hold and dynamic investors withdifferent planning horizons. As in Barberis (2000), particular attention ispaid to estimation risk, i.e., uncertainty about the true values of the...

It is common to differentiate asset allocation strategies with respect tothe length of the planning horizon. The process of selecting a long-termtarget asset allocation is commonly called strategic asset allocation. Theshort-term variation in asset allocation around that target is called...

This paper aims to survey selected recent papers presenting new evidenceon an age-old question in financial economics: Are stock market returnspredictable?. The hypothesis that equity returns are predictable (specificallyat long horizons) has been called a new fact in finance by Cochrane(1999)....