A large literature over several decades reveals both extensive concern with the question of time-varying betas and an emerging consensus that betas are in fact time-varying, leading to the prominence of the conditional CAPM. Set against that background, we assess the dynamics in realized betas,...

This article empirically investigates the volatility spillover of stock returns from the market to disaggregated industry sectors. Seventeen sectors from the US and UK stock markets are estimated by the GARCH technique based on daily data from 1973 to 2008. The key findings are two-fold. In the...

A speculative bubble is usually defined as the difference between the market value of a security and its fundamental value. Although there are several important theoretical issues surrounding the topic of asset bubbles, the existence of bubbles is inherently an empirical issue that has not been...

The extant literature predicts market returns with "simple" models that use only a few parameters. Contrary to conventional wisdom, we theoretically prove that simple models severely understate return predictability compared to "complex" models in which the number of parameters exceeds the...

This paper gives money a role in providing cheap collateral in a model of banking; besides the Taylor Rule, monetary policy can affect the risk-premium on bank lending to firms by varying the supply of M0, so at the zero bound monetary policy is effective; fiscal policy crowds out investment via...

This paper aims an empirical investigation of uncertainty in the Euro Zone as well as the US. For this purpose I conduct a factor analysis of uncertainty measures starting in 2001 until the end of 2011. I use survey-based data provided by the ECB and the Federal Reserve Bank of Philadelphia as...

We study the effects of securitization on renegotiation of distressed residential mortgages over the current financial crisis. Unlike prior studies, we employ unique data that directly observe lender renegotiation actions and cover more than 60% of the U.S. mortgage market. Exploiting...

The meltdown in residential real-estate prices that commenced in 2006 resulted in unprecedented mortgage delinquency rates. Until mid-2009, lenders and servicers pursued their own individual loss mitigation practices without being significantly influenced by government intervention. Using a...

A striking and unexpected feature of the financial crisis has been the sharp appreciation of the US dollar against virtually all currencies globally. The paper finds that negative US-specific macroeconomic shocks during the crisis have triggered a significant strengthening of the US dollar,...