How do people understand business-cycle comovements of macro-finance variables? I develop an empirical and theoretical framework to investigate people’s mental models, extending the univariate Coibion and Gorodnichenko (2015) regression to address multivariate relations. Forecast revisions of...

This article evaluates the predictability of the equity risk premium in the United States by comparing the individual and complementary predictive power of macroeconomic variables which are popular in academia and technical indicators which are widely used by practitioners in the market using a...

While macroeconomic variables have been used extensively to forecast the U.S. equity risk premium and build models to explain it, relatively little attention has been paid to the technical stock market indicators widely employed by practitioners. Our paper fills this gap by studying the...

We find that high macroeconomic uncertainty is associated with greater accumulation of physical capital, despite a reduction in investment and valuations. To reconcile this puzzling evidence, we show that uncertainty predicts lower depreciation and utilization of existing capital, which...

This study provides general methods to measure and characterize the welfare costs of long-run consumption uncertainty with Epstein and Zin (1989) preferences. I find that long-run uncertainty can create significant welfare costs even when risk aversion is moderate and the short-run consumption...

We describe how networks based on information theory can help measure and visualize systemic risk, enhance diversification, and help price assets. To do this, we first define a distance measure based on the mutual information between asset pairs and use this measure in the construction of...

We develop a general equilibrium model in which heterogeneous entrepreneurs produce output in the presence of financing constraints. We model granular uncertainty as the shocks that affect the uncertainty in future idiosyncratic productivity without changing the cross-sectional dispersion of...

We introduce an information-based fragility measure for GMM models that are potentially misspecified and unstable. A large fragility measure signifies a GMM model's lack of internal refutability (weak power of specification tests) and external validity (poor out-of-sample fit). The fragility of...

Evidence suggests that human psychology plays a role in individuals' financial decisions, with economically meaningful consequences observed even at the aggregate market level. This chapter considers many instances whereby human mood induced by exogenous factors is associated with economically...

I connect interest rates, risk premia and welfare costs of long-run consumption uncertainty in a setting with Epstein and Zin (1989) preferences. I find that long-run uncertainty can create significant welfare costs even when risk aversion is moderate and the short-run consumption volatility...