This methodological paper presents a class of stochastic processes with appealing properties for theoretical or empirical work in finance and macroeconomics, the quot;linearity-generatingquot; class. Its key property is that it yields simple exact closed-form expressions for stocks and bonds,...

This methodological paper presents a class of stochastic processes with appealing properties for theoretical or empirical work in finance and macroeconomics, the "linearity-generating" class. Its key property is that it yields simple exact closed-form expressions for stocks and bonds, with an...

Empirical evidence suggests that fixed income markets exhibit unspanned stochastic volatility (USV), that is, that one cannot fully hedge volatility risk solely using a portfolio of bonds. While Collin-Dufresne and Goldstein (2002) showed that no two-factor Cox-Ingersoll-Ross (CIR) model can...

Dynamic correlation, Exogenous variables, DCCX, Macroeconomic Announcements, Diversification benefits. - In this dissertation, I analyze determinants of conditional correlations. Specifically, I propose the generalized DCCX model that facilitates the analysis of the effects of exogenous...

This paper examines the effect of equity investor sentiment on the bond market. While empirical evidence suggests that high investor sentiment leads to equity overvaluation, there is limited evidence of its effect on the bond market. Sentiment can have a negative impact on bond returns via two...

This paper investigates the dynamic linkages in terms of the first and second moments between stock and bond returns, within a wide range of advanced economies, over the different phases of the recent financial crisis. The adopted empirical framework is a bivariate volatility model, where...

High-frequency financial data are characterized by a set of ubiquitous statistical properties that prevail with surprising uniformity. While these 'stylized facts' have been well-known for decades, attempts at their behavioral explanation have remained scarce. However, recently a new branch of...