We show in a theoretical model that the expected excess return on any asset depends on its covariance not only with the market portfolio, but also with changes in the representative agent's estimate. We test our model using GMM and compare it to the CAPM. The results suggest that adding an...

This paper analyzes the term structure of interest rates in an exchangeonly Lucas (1978) economy where consumers learn about a stochastic growth rate through observations of the endowment process and an external public signal. We show that there is a premium for noisy external public information...

We derive exact expressions for the risk premia for general distributions in a Lucas economy and show that the errors when using log-linear approximations can be economically significant when the shocks are nonnormal. Assuming growth rates are Normal Inverse Gaussian (NIG) and fitting the...

We analyze how a benevolent, privately informed government agency would optimally release information about the economy׳s growth rate when the agents hold heterogeneous beliefs. We model two types of agent: “conforming” and “dissenting.” The former has a prior that is identical to that...

This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor's expected life-time utility, and analyze his hedging demands for intertemporal changes...

This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor’s expected life-time utility, and analyze his hedging demands for intertemporal...

We analyze banks’ pooling of corporate loans and propose Pareto-improving sharing rules that depend only on the relative sizes of the loans. Implementation of these sharing rules do not require any precise knowledge of default probabilities or default correlations.

This paper derives a set of policy lessons for Portugal from the new fiscal framework including a fiscal policy council that gradually emerged in Sweden after the deep economic crisis of the early 1990s. By now, Swedish public finances stand out among the strongest in Europe. Recent Swedish...

This article suggests an extension of the standard decomposition of the concentration index that allows for an exploration of the pathways through which socioeconomic background relates to income-related health inequality. This novel approach is contrasted to the standard one using a panel of...