This paper considers the well established empirical fact that conditional correlations among cross-country interest rates switch signs. Switching implies an alternation of coupling and decoupling of global bond markets over time. This evidence is robust to alternative estimation schemes. Here we...

Experience in one product market can potentially improve firm performance in a related product market in the future. Thus, entry into a market is determined not just by profits in that market but also by its future impact on profitability in other markets. We formulate and estimate a dynamic...

We use purely statistical methods to determine if the pricing kernel is the intertemporal marginal rate of substitution under recursive utility. We introduce a nonparametric Bayesian method that treats the pricing kernel as a latent variable and extracts it and its transition density from...

A common model for security price dynamics is the continuous time stochastic volatility model. For this model, Hull and White (1987) show that the price of a derivative claim is the conditional expectation of the Black-Scholes price with the forward integrated variance replacing the...

Efficient Method of Moments (EMM) is used to estimate and test continuous time diffusion models for stock returns and interest rates. For stock returns, a four-state, two-factor diffusion with one state observed can account for the dynamics of the daily return on the Samp;P composite index,...

The paper describes the use of the Gallant-Tauchen efficient method of moments (EMM) technique for diagnostic checking of stochastic differential equations (SDEs) estimated from financial market data. The EMM technique is a simulation-based method that uses the score function of an auxiliary...

The paper estimates and examines the empirical plausibiltiy of asset pricing models that attempt to explain features of financial markets such as the size of the equity premium and the volatility of the stock market. In one model, the long run risks model of Bansal and Yaron (2004), low...

This paper investigates the implications of mixtures of affine, quadratic, and nonlinear models for the term structure of volatility. The dynamics of the term structure of interest rates appear to exhibit pronounced time-varying or stochastic volatility. Ahn, Dittmar, and Gallant (2000) provide...

This paper theoretically explores the characteristics underpinning quadratic term structure models, QTSMs, which designate the yield on a bond as a quadratic function of underlying state variables. We develop a comprehensive QTSM, which is maximally flexible and thus encompasses the features of...