We extend Lucas’s classic asset-price model by opening the stochastic process driving dividends to Knightian uncertainty arising from unforeseeable change. Implementing Muth’s hypothesis, we represent participants’ expectations as being consistent with our model’s predictions and...

This paper provides a synthesis of theoretical and empirical work on the Great Gatsby Curve, the positive empirical relationship between cross-section income inequality and persistence of income across generations. We present statistical models of income dynamics that mechanically give rise to...

In 2016, Eugene Fama mentioned that he wanted a systematic way of identifying and predicting a stock market bubble. This paper develops a simple statistical method to sequentially monitor the stock market price changes. A new and simple boundary function is proposed, and asymptotic properties...

We derive optimal labor income tax schedules for married agents, taking the distinction between interpersonal and interhousehold inequality seriously. Each household consists of two workers with different productivity levels and unequal access to the family’s economic resources. We handle the...

We analyze the integration of intermittent renewables-based technologies into an elec- tricity mix comprising of conventional energy. Intermittency is modeled by a contingent electricity market and we introduce demand-side flexibility through the retailing structure. Retailers propose...

This study considers a three-period overlapping generations model with an endogenous growth setting in which an agent borrows a loan in the first period and repays it in the second period in a perfect credit market. Two educational subsidy schemes are considered: one is provided when an agent...

Implicit finite difference approximations are derived for both the first and second derivatives. The boundary closures are based on the banded-norm summation-by-parts framework and the boundary conditions are imposed using a weak (penalty) enforcement. Up to 8th order global convergence is...

We present an exponentially convergent semi-implicit meshless algorithm for the solution of Navier-Stokes equations in complex domains. The algorithm discretizes partial derivatives at scattered points using radial basis functions (RBF) as interpolants. Higher-order polynomials are appended to...

This study empirically documents the effect of ambiguity on stock returns in a major emerging market along with the ambiguity attitude under various market conditions. Our results show that ambiguity is a priced factor in Turkish stock market returns with a positive premium that is distinct from...