Affine term structure models (ATSMs) are known to have a trade-off in predicting future Treasury yields and fitting the time-varying volatility of interest rates. This paper empirically studies the role of macroeconomic variables in simultaneously achieving these two goals under affine models....

This paper examines the daily abnormal returns of corporate bonds with different priorities following Moody's announcements. We show that bond returns react significantly positive (negative) following upgrade (downgrade) Watchlist events but not necessarily following rating change events....

This paper presents a monetary model of the term structure of interest rates. This model is intended to explain the stylized facts in Treasury yields including counter cyclical variations of bond risk premia without challenging both short-run and long-run monetary facts. To this end, we study...

This paper studies time varying bond returns via macroeconomic variables. We find that a single macro index consisting of inflation, real activities and money can predict annual excess bond returns of 1-5 year maturities with R-squares up to 37%. The macro factor has a symmetric tent-shape, when...

Recent studies find stock returns are negatively related to idiosyncratic volatility (IVOL). We find that aggregate variables known to explain stock market volatility affect the IVOL and portfolio returns sorted by IVOL. Macroeconomic volatilities, yield spreads, dividend yield, trading volume...

This paper identifies a global uncertainty factor by estimating an international asset pricing model featuring macroeconomic uncertainty with long-run risk factors. The global factor captures the time-varying fluctuations of common stochastic volatilities of consumption and dividend growths for...

Information about credit quality is uncertain and varies across debt maturity. We show that an ambiguity-averse firm manager will avoid maturities with ambiguous credit information. We thus hypothesize that firms choose maturity structures where perceived credit quality uncertainty is lower....

Credit information quality is uncertain and varies across corporate bonds. We hypothesize that bond funds adjust their bond holdings to reduce perceived credit quality uncertainty if fund managers dislike ambiguity. Using statistical proximity measures of firm survival probabilities predicted by...

This paper investigates the effects of dynamic capital market conditions in a general equilibrium model, employing a process of switching steady-state levels of the volatility of market conditions (SS-uncertainty). Decision-makers predict SS-uncertainty regimes using past fundamental shocks, but...

We propose an asset pricing model in a production economy where cash flows are determined by firms' dividend and investment decisions. Managers choose extensive and intensive margins in payout policy while facing non-convex costs as firm cash holdings grow. Differences in the timing of dividend...