This paper develops a dynamic asset pricing model with persistent heterogeneous beliefs. The model features competitive traders who receive idiosyncratic signals about an underlying fundamentals process. We adapt Futia's (1981) frequency domain methods to derive conditions on the fundamentals...

This paper studies the changes in world business cycles during 1960-2003. We employ a Bayesian dynamic latent factor model to estimate common and country-specific components in the main macroeconomic aggregates of the Group of Seven (G-7) countries. We then quantify the relative importance of...

Recent studies have documented the existence of a quot;predictability smilequot; in the term structure of interest rates: spreads between long maturity rates and short rates predict subsequent movements in interest rates provided the long horizon is three months or less or if the long horizon is...