Recent findings on the term structure of equity and bond yields pose serious challenges to existing models of equilibrium asset pricing. This paper presents a new equilibrium model of subjective expectations to explain the joint historical dynamics of equity and bond yields (and their yield...

Equilibrium bond-pricing models rely on inflation being bad news for future growth to generate upward-sloping nominal yield curves. We develop a model that can generate upward-sloping nominal and real yield curves by instead using ambiguity about inflation and growth. Ambiguity can help resolve...

Some key features in the historical dynamics of U.S. Treasury bond yields-a trend in long-term yields, business cycle movements in short-term yields, and a level shift in yield spreads-pose serious challenges to existing equilibrium asset pricing models. This paper presents a new equilibrium...

We assess the impact of large-scale asset purchases, commonly known as quantitative easing (QE), conducted by Sveriges Riksbank and the European Central Bank (ECB) on bond risk premia in the Swedish government bond market. Using a novel arbitrage-free dynamic term structure model of nominal and...

Cochrane and Piazzesi (2005) show that (i) lagged forward rates improve the predictability of annual bond returns, adding to current forward rates, and that (ii) a Markovian model for monthly forward rates cannot generate the pattern of predictability in annual returns. These results stand as a...

We study the economic sources of stock-bond return comovement and its time variation using a dynamic factor model. We identify the economic factors employing structural and non-structural vector autoregressive models for economic state variables such as interest rates, (expected) inflation,...

We develop tools for computing equilibrium bond prices for the discrete-time version of the Vayanos-Vila (2009) model. With the maturity structure included in pricing factors, factor loadings for equilibrium bond yields depends on parameters describing maturity structure dynamics and other model...

In a world of interconnected financial markets it is plausible that risk appetite — an important factor in asset pricing — is determined globally. By constructing an estimate of variance risk premia (VRP) for UK, US and euro-area equity markets, we are able to estimate international variance...

A downward-sloping term structure of equity and upward-sloping term structures of interest rates arise endogenously in a general-equilibrium model with nominal rigidities and nonlinear habits in consumption. Countercyclical marginal costs exacerbate the procyclicality of dividends after a...

A downward-sloping term structure of equity and upward-sloping term structures of interest rates arise endogenously in a general-equilibrium model with nominal rigidities and nonlinear habits in consumption. Countercyclical marginal costs exacerbate the procyclicality of dividends after a...