Using a unique data set of individual professional forecasts, we document disagreement about the future path of monetary policy, particularly at longer horizons. The stark differences in short rate forecasts imply strong disagreement about the risk-return trade-off of longer-term bonds....

We provide the first large-scale study of the performance of expected-return proxies (ERPs) internationally. Analyst-forecast-based ICCs are sparsely populated and not robustly associated with future returns. Earnings-model-forecast-based ICCs are well-populated, but are unreliable outside the...

I study how professional forecasts of interest rates across maturities respond to new information. I document that forecasts for short-term rates underreact to new information while forecasts for long-term rates overreact. I propose a new explanation based on "autocorrelation averaging,''...

I study the dynamics of default-free bond yields and term premia using a novel equilibrium term structure model with a New-Keynesian core and imperfect information about productivity. The model generates term premia that are on average positive with sizable countercyclical variation that arises...

In this paper we survey the theoretical and empirical literatures on market liquidity. We organize both literatures around three basic questions: (a) how to measure illiquidity, (b) how illiquidity relates to underlying market imperfections and other asset characteristics, and (c) how...

We derive a model of bond pricing under ambiguity, showing that ambiguity interacts with risk to determine spreads. Since default is an inherently "unfavorable" outcome, ambiguity-averse bondholders overweigh its probability and demand higher yields for bonds with higher ambiguity.Empirically,...

With formal theoretical conditions as premise, this study develops a formal empirical structure which facilitates, simultaneously inferences in respect of each of rationality and efficiency of pricing of idiosyncratic risk. Using exactly the same data, the new empirical structure revolves around...

Post-issue stock underperformance is driven, at least in part, by the contemporary decline in idiosyncratic risk (proxied by idiosyncratic volatility) exposure for seasoned equity offerings (SEO) firms. As young firms dominate the SEO market, they generally face higher uncertainty of mean...

Using a news-based gauge of geopolitical risk, we study its role for asset pricing in global emerging markets. We find that changes in risk positively predict future stock returns. The countries with the highest increase in geopolitical uncertainty outperform their counterparts with the lowest...

Investors' return expectations are pivotal in stock markets, but the reasoning behind these expectations remains a black box for economists. This paper sheds light on economic agents' mental models - their subjective understanding - of the stock market, drawing on surveys with the US general...