This paper presents efficient binomial and trinomial trees for the Cox, Ingersoll, and Ross (CIR) and the constant-elasticity-of-variance (CEV) short rate models. We correct an error in the original square root transform of Nelson and Ramaswamy [1990], and modify their transform by truncating...

This paper studies the structure of stock market crashes, rallies, their jump arrival rates, and extremes. Large market moves are characterized in a pure-jump modeling framework. Based on both raw and devolatized returns, it is shown empirically that crashes are more severe in intensity than...

We use a consumption-based asset pricing model with Epstein-Zin-Weil recursive preferences to explain the cross-section of excess returns on nominal US Treasury bond portfolios. We use a novel approach to extract the model factors from a FAVAR using a large panel; of macro and financial data. We...

According to the dynamic version of the Gordon growth model, the long-run expected return on stocks, stock yield, is the sum of the dividend yield on stocks plus some weighted average of expected future growth rates in dividends. We construct a measure of stock yield based on sell-side analysts'...

Investors rebalance their portfolios as their views about expected returns and risk change. We use empirical measures of portfolio rebalancing to back out investors' views, specifically their views about the state of the economy. We show that aggregate portfolio rebalancing across equity sectors...

Using a two-period model of a commodity market with a large number of atomistic consumers and two strategic sellers, we show that a speculator with access to storage can lower the market price while buying and raise the price while selling by clever use of limit, stop-loss, and market orders....

In over-the-counter (OTC) markets, customers search for counterparties. Little is known about this process, however, because existing data is comprised of transaction records, which are only informative about the end of a successful search. Leveraging data from the leading trading platform for...

The paper estimates and examines the empirical plausibiltiy of asset pricing models that attempt to explain features of financial markets such as the size of the equity premium and the volatility of the stock market. In one model, the long run risks model of Bansal and Yaron (2004), low...

The covariance between US Treasury bond returns and stock returns has moved considerably over time. While it was slightly positive on average in the period 1953--2009, it was unusually high in the early 1980''s and negative in the 2000''s, particularly in the downturns of 2000--02 and 2007--09....

Many leading asset pricing models predict that the term structures of expected returns and volatilities on dividend strips are strongly upward sloping. Yet the empirical evidence suggests otherwise. This discrepancy can be reconciled if these models replace their exogenously specified dividend...