In this paper we provide a thorough characterization of the asset returns implied by a simple general equilibrium production economy with Chew–Dekel risk preferences and convex capital adjustment costs. When households display levels of disappointment aversion consistent with the experimental...

We offer a detailed empirical investigation of the European sovereign debt crisis based on the theoretical model by Arghyrou and Tsoukalas (2010). We find evidence of a marked shift in market pricing behaviour from a 'convergence-trade' model before August 2007 to one driven by...

Based on individual expectations from the Survey of Professional Forecasters, we construct a real-time proxy for expected term premium changes on long-term bonds. We empirically investigate the relation of these bond term premium expectations with expectations about key macroeconomic variables...

In this paper, we present a general discrete-time affine framework aimed at jointly modeling yield curves associated with different debtors. The underlying fixed-income securities may differ in terms of credit quality and/or in terms of liquidity. The risk factors follow conditionally Gaussian...

This paper studies the role of the equity price channel in business cycle fluctuations, and highlights its systemic risk across all sectors of the economy. We develop a canonical New-Keynesian dynamic stochastic general equilibrium model with a tractable role for the equity market in banking,...

This paper addresses questions about the structure of the economy and financial markets raised by recent research on the term structure. The work of Duffee (2012) and Joslin, Preibsch and Singleton (2012) suggests that macroeconomic variables affect risk premia rather than bond yields, which are...

We offer a detailed empirical investigation of the EMU sovereign-debt crisis. We find a marked shift in market pricing behaviour from a ‘convergence-trade’ model before August 2007 to one driven by macro-fundamentals and international risk thereafter. We find evidence of contagion effects,...

This paper implements an affine term structure model that accommodates "unspanned" macro risks for the Euro area, i.e. distinct from yield-curve risks. I use an averaging-estimator approach to obtain a better estimation of the historical dynamics of the pricing factors, thus providing more...

This paper develops an affine model of the term structure of interest rates in which bond yields are driven by observable and unobservable macroeconomic factors. It imposes restrictions to identify the effects of monetary policy and other structural disturbances on output, inflation, and...

This paper implements an affine term structure model that accommodates "unspanned" macro risks for the Euro area, i.e. distinct from yield-curve risks. I use a Near-Cointegrated VAR-like approach to obtain a better estimation of the historical dynamics of the pricing factors, thus providing more...