Economic shocks affect corporate cash flows far more than they do aggregate consumption. We examine the asset-pricing implications of corporate sensitivity to shocks using a continuous-time representative agent framework in which earnings are a stochastic fraction of total consumption. We...

Corporate cash flows are highly volatile and strongly procyclical. We examine the asset-pricing implications of the sensitivity of corporate cash flows to economic shocks within a continuous-time model in which dividends are a stochastic fraction of aggregate consumption. We provide closed-form...

An inherent risk facing investors in financial markets is that a major event may trigger a large abrupt change in stock prices and market volatility. This paper studies the implications of jumps in prices and volatility on investment strategies. Using the event-risk framework of Duffie, Pan, and...

We conduct an empirical analysis of electricity forward prices using a high-frequency data set of hourly spot and day-ahead forward prices. We find that there are significant risk premia in electricity forward prices. These premia vary systematically throughout the day and are directly related...

If stocks go up, investors may want to rebalance. But investors cannot all rebalance. Expected returns mustrise (or other moments must change) so that the average investor is happy to hold the total market portfolio despite its greater allocation to stocks. In this way, of market clearing can...

This paper uses an assignment model to understand the cross section of house prices within a metro area. Movers' demand for housing is derived from a life-cycle problem with credit market frictions. Equilibrium house prices adjust to assign houses that differ by quality to movers who differ by...

A lot, including a few things you may not expect. Previous studies find that the term spread forecasts GDP but these regressions are unconstrained and do not model regressor endogeneity. We build a dynamic model for GDP growth and yields that completely characterizes expectations of GDP. The...

Many researchers have used federal funds futures rates as measures of financial markets’ expectations of future monetary policy. However, to the extent that federal funds futures reflect risk premia, these measures require some adjustment for risk premia. In this paper, we document that excess...