In standard production models wage volatility is far too high and equity volatility is far too low. A simple … and (ii) higher equity volatility. Furthermore, the model produces several other hard to explain features of financial … data: (iii) high Sharpe ratios, (iv) low and smooth interest rates, (v) time-varying equity volatility and premium, (vi) a …

During the recent financial crisis, there was a dramatic spike, across all industries, in the volatility of individual … spikes in firm-specific price volatility, a pattern that poses a puzzle in terms of existing financial theory. The most … difficult economic times. This discovery of a long history of crisis-induced spikes in firm-specific price volatility has …

time-series, the model matches the procyclicality and volatility of housing investment, and the procyclicality of mortgage … and lower downpayments, and find that these two changes can explain, in the model and in the data, the reduced volatility … of housing investment, the reduced procyclicality of mortgage debt, and a small fraction of the reduced volatility of GDP …

. As a result macro aggregates as well as asset prices are subjected to expectations about future economic growth not only … estimated model is able to predict the lead of equity returns over output growth and investment growth as observed in U.S. data …

We document how firm-specific volatility in sales, earnings and employment growth evolved year by year in Japan. Our … volatility measure also indicates the evolution of firm turnover. We find that patterns in firm-specific volatility have changed …. Firm volatility tended to decline during the recovery after 2002. We assess whether the rise in firm turnover and deep …

What is the source of interest rate volatility? Why do low interest rates precede business cycle booms? Most observers …

This paper provides an extensive analysis of the predictive ability of financial volatility measures for economic … activity. We construct monthly measures of aggregated and industry-level stock volatility, and bond market volatility from … daily returns. We model log financial volatility as composed of a long-run component that is common across all series, and a …

of housing adjustment. In the time-series dimension, the model accounts for the pro-cyclicality and volatility of housing … following question: what are the consequences for aggregate volatility of an increase in household income and a decrease in down … can explain: (1) 45 percent of the reduction in the volatility of household investment; (2) the decline in the correlation …