This study predicts and finds that the interaction of firm-level and aggregate-level shocks explains a significant portion of shocks to macroeconomic activity. Specifically, we hypothesize that the relation between uncertainty and economic growth is most pronounced when both firm-level and...

In the present paper we propose a new method, the Penalized Adaptive Method (PAM), for a data driven detection of structural changes in sparse linear models. The method is able to allocate the longest homogeneous intervals over the data sample and simultaneously choose the most proper variables...

The knowledge of the type of cash-flows offered by an asset, such as either equity-like or debt-like, is necessary for its net present valuation. Recently, the consequences of trades of assets with ambiguous cash-flows on financial systems have been discussed. Several forms of contingent capital...

This paper examines the asset pricing implications of sector-specific shocks in a multi-sector economy where heterogeneous firms interact in the markets for material inputs, investment goods, and final goods. The model is solved using a third-order perturbation and is estimated by the simulated...

We investigate, for China's investable companies, the relation between stock returns and firm characteristics, and the impacts on the relation of the 2001-2003 financial reforms to further liberalize stock markets. For the first time in the literature, we document coexistence of a positive size...

Using a continuous time, structural model of a dealer-bank, we derive fair value equations for credit risky financial products that can not be perfectly hedged, fully taking into account the impact the contracts have on the dealer-bank's earnings volatility and, consequently, their solvency and...

This paper examines the benefits of international diversification for US investors, while accounting for market development, corporate governance, market cap effects, and structural change across countries over period August 1996-July 2013. Improved risk adjusted returns are obtained from a...

In this paper, we provide evidence that the time-series properties of stock returns includeboth structural change and time dependence in the conditional variance. The absence of astructural change component tends to overstate the persistence parameter in a time-dependentmodel specification. The...

We build a small-scale representation of an economy in which the short rate, inflation and output exhibit unobserved secular and cyclical components that both drive bond yields. We impose the economic restriction that expected bond returns are purely cyclical so that their variance does not...