Exchange rates depreciate by the difference between the domestic and foreign marginal utility growths. Exchange rates vary a lot , as much as 10% per year. However, equity premia imply that marginal utility growths vary much more, by at least 50% per year. This means that marginal utility...

Risk-off refers to a change in risk preferences and the associated portfolio rebalancing. We identify these episodes using the switch to a polarized correlation regime of foreign-exchange returns. These risk-off transitions are relatively infrequent but noticeably increasing over time, are...

We analyze the role of macroeconomic fundamentals for the term structure of sovereign bond yields. We take a structured economic news flow approach to obtain a continuously updated measure of fundamentals and focus on a sample with large variation in economic conditions, specifically the...