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

This paper studies the contribution of limited asset market participation to the variability of real interest rates in the UK. Using a quadratic term structure model of real interest rates in an economy with endogenously segmented asset markets, I estimate the contribution of money and real...

If the firm chooses the stock of capital, labor, cash (distributions) so as to maximize its expected discounted present value, its investment policy should adjust endogenously to changes in investor preferences. It is hypothesized that quantitative easing (QE) affects asset prices through a...

Whereas much of previous literature focuses upon the impact on yields from the Federal Reserve's large-scale asset purchases (LSAPs), we study the changes to expected returns. Through a simple general equilibrium model, we motivate how LSAPs may impact equilibrium bond and equity expected...

In recent research on asset allocation attention has been paid to time variations in the expected return on stocks. In particular, how does the long horizon variation in expected returns influence the inter-temporal hedging demand for stocks. Unfortunately, this problem for investors leads to a...

We investigate whether foreign purchases of long-term U.S. Treasury securities significantly affect their expected excess-returns. We run predictive regressions of realized excess returns on measures of net purchases of treasuries by both foreign official and private agents. We find that...

We are the first to analyze bond mutual funds' permission and use of complex investment practices like derivatives, restricted securities and securities lending. Based on unique regulatory information from the SEC's N-SAR filings, we show that most complex investments do not affect fund...

Existing work on investor heterogeneity in corporate bond markets mainly focuses on the shares of different types of investors. We find that investor concentration also plays an important role in corporate bond pricing dynamics and secondary market liquidity, even after controlling the shares of...

The concept of a market portfolio plays an important role in many financial theories and models. Knowledge of each asset's share of the invested capital markets is both useful information and a good starting point for investors considering the appropriate allocation to the asset. In our latest...

We study the implications of recent advances in the asset pricing literature on investment, and vice versa in a DSGE model with non-trivial heterogeneity in production units, lumpy investment, and long run productivity risk. We make three contributions. First, for aggregate asset pricing,...