Fleckenstein et al. (2014) document that nominal Treasuries trade at higher prices than inflation-swapped indexed bonds, which exactly replicate the nominal cash flows. We study whether this mispricing arises from liquidity premiums in inflation-indexed bonds (TIPS) and inflation swaps. Using US...

This paper decomposes aggregate and individual stock returns into cash flow news, interest rate news, and risk premium news. We then extend the “good beta, bad beta” approach of Campbell and Vuolteenaho (2004) by allowing for a third beta: exposure to interest rate news. Using various stock...

We estimate the pricing kernel from options on the S&P 500 index for different horizons and over time. This allows us to compare short-term and long-term pricing kernels and analyze their time-series variation. We show that the well documented pricing kernel puzzle–the non-monotonicity of the...

We propose a new asset pricing model which generalizes the mean-variance framework by including probability weighting, specifically the overweighting of rare, high-impact events. Our model—the Π-CAPM—allows for disentangling volatility and skewness effects and predicts that idiosyncratic...

We propose an easy to implement yield curve extrapolation method to determine long-term interest rates suitable for regulatory valuation. We empirically evaluate this approach for the German nominal bond market, by estimating the model on bonds with maturities up to 20 years and assessing the...

We study equity markets between 1900 and 1925 to provide a pure out-of-sample test of three major asset pricing anomalies: momentum, long-term reversal, and size. We find strong evidence of momentum in almost every market. Momentum is a local phenomenon, as the returns of momentum long-short...