Expected returns vary over time along with business cycles. Momentum payoffs are lack of rational explanation. This paper examines how the time-varying expected returns affect each individual firm differently, and hence what the cross-sectional phenomena are. The result shows that the model...

This paper focuses on funds of funds (FOFs) as a form of financial intermediation in private equity (both buyout and venture capital). After accounting for fees, FOFs provide returns equal to or above public market indices for both buyout and venture capital. While FOFs focusing on buyouts...

The equity premium follows a pronounced v-shape pattern around the beginning of recessions. It sharply drops into negative territory just before business cycle peaks and then strongly recovers as the recession unfolds. Recessions are preceded by an inverted yield curve. Thus probit models using...

We build an equilibrium model to explain why stock return predictability concentrates in bad times. The key feature is that investors use different forecasting models, and hence assess uncertainty differently. As economic conditions deteriorate, uncertainty rises and investors' opinions...

We review the labor market implications of recent real-business-cycle models that successfully replicate the empirical equity premium. We document the fact that all models considered in this survey with the exception of Boldrin, Christiano, and Fisher (2001) imply a negative correlation of...

We document the empirical fact that asset prices in the consumption-goods and investment-goods sector behave almost identically in the US economy. In order to derive the cyclical behavior of the equity returns in these two sectors, we consider a standard two-sector real-business cycle model with...

Severe simultaneous recessions are defined to occur when at least half of the countries under investigation (Australia, Canada, Germany, Japan, United Kingdom, and United States) are in recession simultaneously. I pose two new research questions that extend upon stylized facts for US recessions....

This paper shows that the stylized fact of average mutual fund underperformance documented in the literature stems from expansion periods when funds have statistically significant negative risk-adjusted performance and not recession periods when risk-adjusted fund performance is positive. These...

This is the first paper in the DSGE literature to match key business cycle moments and long-run equity returns in a small open economy with production. These results are achieved by introducing four modifications to a standard real business cycle model: (1) borrowing and lending costs are...

We review the labor market implications of recent real-business-cycle models that successfully replicate the empirical equity premium. We document the fact that all models considered in this survey with the exception of Boldrin, Christiano, and Fisher (2001) imply a negative correlation of...