Building on <link rid="b20">Duffie and Kan (1996)</link>, we propose a new representation of affine models in which the state vector comprises infinitesimal maturity yields and their quadratic covariations. Because these variables possess unambiguous economic interpretations, they generate a representation that is...

Using a new Bayesian method for the analysis of diffusion processes, this article finds that the nonlinear drift in interest rates found in a number of previous studies can be confirmed only under prior distributions that are best described as informative. The assumption of stationarity, which...

We investigate the asset pricing and macroeconomic implications of the ratio of new orders (NO) to shipments (S) of durable goods. NO/S measures investment commitments by firms, and high values of NO/S are associated with a business cycle peak. We find that NO/S proxies for a short-horizon...

of a higher depreciation rate, which makes inventory riskier than fixed capital. In support of this result, our empirical work documents that risk premia, rather than real interest rates, are negatively related to future inventory growth. This relation is highly significant and robust to a...