The "home bias" phenomenon states that empirically, economic agents often under- utilize opportunities beyond their country borders, and it is well-documented in various international pricing and purchase patterns. This bias manifests in the forms of fewer exchanges of goods and net...

In this paper we develop a simple model to link anchoring and loss aversion with house price dynamics. We have two testable implications: 1) when both cognitive biases are present, price dispersion and trade volume are pro-cyclical; 2) if anchoring decreases with time, then price dispersion and...

The "home bias" phenomenon states that empirically, economic agents often under-utilize opportunities beyond their country borders, and it is well-documented in various international pricing and purchase patterns. This bias manifests in the forms of fewer exchanges of goods and net...

We offer an explanation of why changes in house prices are predictable. Extending the static model in Leung and Tsang (2010), we analyze the housing market with loss averse sellers and anchoring buyers in a dynamic setting. A buyer's current offer price increases with the housing unit's previous...

The nominal exchange rate is both a macroeconomic variable equilibrating international markets and a financial asset that embodies expectations and prices risks associated with cross border currency holdings. Recognizing this, we adopt a joint macro-finance strategy to model the exchange rate....

Credible Granger-causality analysis appears to require post-sample inference, as it is well-known that in-sample fit can be a poor guide to actual forecasting effectiveness. But post-sample model testing requires an often-consequential a priori partitioning of the data into an 'in-sample' period...

The literature on the relationship between real output growth and the growth rate in the price of oil, including an allowance for asymmetry in the impact of oil prices on output, continues to evolve. Here we show that a new technique, which allows us to control for both this asymmetry and also...

We estimate a monetary policy rule for the US allowing for possible frequency dependence—i.e., allowing the central bank to respond differently to more persistent innovations than to more transitory innovations, in both the unemployment rate and the inflation rate. Our estimation method uses...

Credible Granger-causality analysis appears to require post-sample inference, as it is well-known that in-sample fit can be a poor guide to actual forecasting effectiveness. However, post-sample model testing requires an often-consequential <em>a priori</em> partitioning of the data into an...

We construct a cross-section of stock prices and their corresponding present values of future cash flows. A regression of present value on the initial stock price should have a slope coefficient equal to 1.0. For short horizons, this is a cross-section version of checking the random walk model...