The sharp increase in both gross and net international capital flows over the past two decades has prompted renewed interest in their determinants. Most existing theories of international capital flows are based on one-asset models, which have implications only for net capital flows, not for...

The relationship between asset prices and fundamentals is characterized by both disconnect and predictability: asset prices are largely disconnected from current publicly observed fundamentals and at the same time contain information about future fundamentals, even when conditioning on current...