This paper establishes a causal link between the dollar exchange rate and international trade flows, employing a new instrument for the U.S. Dollar that is based on domestic U.S. housing activity (Ma and Zhang (2019)). In line with the dominant currency paradigm (Gopinath et al. (2020)), import...

This paper documents that the housing cycle, measured by the residential investment share, is a strong in-sample and out-of-sample predictor for the dollar up to twelve quarters. Housing construction is negatively associated with risk premia in equity and bonds, but positively with foreign...

When households consume both nondurable goods and housing services, external habit preference over nondurable consumption generates procyclical demand for housing. Marginal utility falls when housing demand rises and innovations to housing demand arise as a risk factor. Motivated by theory, we...

Using a structural model of default, we construct a measure of systemic default defined as the probability that many firms default at the same time. We account for correlations in defaults between firms through exposures to common shocks. The systemic default measure spikes during recession...

Limited stock market participation can potentially explain the disconnect between international asset prices and macro quantities. An incomplete markets model in which risk sharing for stockholders is high, generates highly correlated equity returns and relatively smooth exchange rates. Risk...

Carbon-intensive firms have been underperforming in the U.S. despite their higher carbon transition risk. The brown-minus-green return spread, or carbon return, is zero on average globally but varies significantly across countries with unexpected cash flow shocks and climate taste shifts. The...

The carbon premium refers to the excess return associated with brown firms and is the focus of several recent influential studies. This paper finds negative excess return associated with carbon intensities but no excess return associated with total carbon emissions and emission growth in the...

This study employs a non-parametric approach to investigate the volatility risk premium in the over-the-counter currency option market. Using a large database of daily delta-neutral straddle quotes in four major currencies - the British pound, the euro, the Japanese yen, and the Swiss franc - we...