We study the properties of the carry trade, a currency speculation strategy in which an investor borrows low-interest-rate currencies and lends high-interest-rate currencies. This strategy generates payoffs which are on average large and uncorrelated with traditional risk factors. We investigate...

A central challenge in asset pricing is the weak connection between stock returns and observable economic fundamentals. We provide evidence that this connection is stronger than previously thought. We use a modified version of the Bry-Boschan algorithm to identify long-run swings in the stock...

Some booms in housing prices are followed by busts. Others are not. It is generally difficult to find observable fundamentals that are useful for predicting whether a boom will turn into a bust or not. We develop a model consistent with these observations. Agents have heterogeneous expectations...

Some booms in housing prices are followed by busts. Others are not. In either case it is difficult to find observable fundamentals that are correlated with price movements. We develop a model consistent with these observations. Real estate agents have heterogeneous expectations about long-run...

This paper studies the empirical performance of a widely used model of nominal rigidities: the Calvo model of sticky goods prices. We describe an extended version of this model with variable elasticity of demand of the differentiated goods and imperfect capital mobility. We find little evidence...

This paper discusses the empirical performance of a widely used model of nominal rigidities: the Calvo model of sticky goods prices. We argue that there is overwhelming evidence against this model. But this evidence is generated under three key maintained assumptions. First, there is no lag...

We examine the empirical properties of the payoffs to two popular currency speculation strategies: the carry trade and momentum. We review three possible explanations for the apparent profitability of these strategies. The first is that speculators are being compensated for bearing risk. The...

We examine the empirical properties of the payoffs to two popular currency speculation strategies: the carry trade and momentum. We review three possible explanations for the apparent profitability of these strategies. The first is that speculators are being compensated for bearing risk. The...

This paper investigates empirically a model of aggregate consumption andleisure decisions in which goods and leisure provide services over time. Theimplied time non-separability of preferences introduces an endogenous source ofdynamics which affects both the co-movements in aggregate...

The production smoothing model of inventories has long been the basic paradigm within which empirical research on inventories has been conducted The basic hypothesis embedded In this model IS that inventories of finished goods serve primarily to smooth production levels in the face of...