Asset Pricing

Pedro Bordalo · Nicola Gennaioli · Giacomo Lanzani · Andrei Shleifer

Bordalo, Gennaioli, Lanzani, and Shleifer develop a cognitive theory of choice in which a decision maker's attention to the features of options is determined by her categorization of the current …

Dominik Boddin · Daniel Marcel te Kaat · Chang Ma · Alessandro Rebucci

This paper identifies and quantifies a housing portfolio channel of quantitative easing (QE) transmission that operates through household portfolio rebalancing toward second homes (as opposed to the …

Pierre-Olivier Gourinchas · Walker Ray · Dimitri Vayanos

The paper develops a two-country preferred-habitat model in which currency and bond markets are populated by different investor clienteles — currency traders with price-elastic demand for foreign …

Jess Benhabib · Feng Dong · Pengfei Wang · Zhenyang Xu

Why do corporate defaults cluster in recurring episodes rather than occurring smoothly? The paper asks whether observable fundamental factors — firm characteristics and macroeconomic variables — are …

Paulo Maio

This paper derives a three-factor consumption model that adds news about long-run consumption growth and news about long-run consumption variance to the baseline Consumption CAPM, and tests it on a …

Jean Tirole

Can an asset's price rationally sit above what its dividends justify, forever? Tirole shows that in an economy of overlapping generations, a self-sustaining price bubble can exist exactly when the …

Robert E. Lucas Jr.

This 1978 Econometrica paper by Robert E. Lucas, Jr. builds a theoretical model of a one-good, pure-exchange economy with identical consumers and a fixed number of stochastically productive units, in …

Andrew B. Abel

A one-parameter-family utility function nests time-separable preferences, "catching up with the Joneses" (utility depends on own consumption relative to lagged aggregate consumption per capita) and …

Stephan Lauermann · Asher Wolinsky

This paper develops an auction model that jointly incorporates three frictions pervading informal price-formation processes: (1) costly recruitment by the seller, (2) costly participation by bidders, …

Michael Ehrmann · Phillipp Gnan · Kilian Rieder

This paper investigates the economics of monetary policy leaks — anonymous disclosures of confidential information by insiders to the media — focusing on three central questions: (1) Are leaks random …

Alexander M Jakobsen

This paper introduces and axiomatically characterizes Coarse Bayesian updating, a generalization of Bayes' rule designed to accommodate the wide empirical evidence that individuals systematically …

John Y. Campbell · Robert J. Shiller

This paper develops a way to test "present value" models -- in which a variable Y (a long rate, a stock price) equals a constant times the discounted present value of expected future values of another …

Hanno Lustig · Nikolai Roussanov · Adrien Verdelhan

Sorting currencies into six portfolios by their forward discounts, this paper shows that a single return-based factor -- the return on the highest minus the return on the lowest interest rate currency …

Andreas Haupt · Zoë Hitzig

Haupt and Hitzig introduce a framework for comparing the privacy properties of different mechanism protocols. The core research question is: when a designer commits to implementing a social choice …

Jonathan Payne · Bálint Szőke · George Hall · Thomas J Sargent

This paper constructs a new dataset of US federal bond prices and uses it to estimate the full term structure of yields on gold-denominated US federal debt from 1791 to 1933 — the entire gold standard …

Stig V. Møller · Thomas Q. Pedersen · Sigurd A. M. Steffensen · Martin M. Andreasen

Using the Livingston survey - the longest-running U.S. survey of professional economists, running twice a year since June 1952 - this paper shows that the expected excess stock return implied by these …

Robert J. Shiller

Shiller tests the "efficient markets model" of stock prices -- that the real price equals the present value of rationally expected future real dividends discounted at a constant real rate -- by …

Hanno Lustig · Adrien Verdelhan

Even the most extreme departure from complete international asset markets -- one in which investors can hold nothing abroad but the foreign risk-free bond -- fails to match the smoothness of exchange …

Lawrence H. Summers

Summers argues that the standard statistical tests used to support the Efficient Markets Hypothesis -- tests for serial correlation in excess returns, and for predictable excess returns conditional on …

Giacomo Lanzani

This paper asks how an agent who fears that none of their probabilistic models is the correct description of the data-generating process (DGP) should update that fear as evidence accumulates, and what …

Ming Zeng · Guihai Zhao

What drives the joint historical dynamics of the term structure of equity yields and nominal bond yields — and can a single unified equilibrium model explain the procyclical equity yield slope, the …

Sergio Villalvazo

This paper studies the cross-sectional dimension of Fisher's (1933) debt-deflation mechanism as it operates during Sudden Stop crises — episodes characterized by large, abrupt reversals in the current …

Kenneth R. French · James M. Poterba

At the end of 1989 Japanese investors held 1.9 percent of their equity abroad, US investors 6.2 percent and British investors 18 percent. Inverting a standard portfolio first-order condition, the …

Andreas Fagereng · Luigi Guiso · Luigi Pistaferri

Using Norwegian administrative registries that record wealth and capital income for the whole population, and for each spouse before they marry, this paper documents that people sort at marriage not …

Lars E. O. Svensson

Svensson derives the demand for money and the pricing of nominal and real interest rates and other assets in a general-equilibrium, pure-exchange monetary economy by treating money symmetrically with …

J. Bradford De Long · Andrei Shleifer · Lawrence H. Summers · Robert J. Waldmann

This paper builds a simple overlapping-generations model of an asset market with two types of traders -- "noise traders," who hold erroneous, randomly-varying beliefs about an asset's expected return, …

Matthew Baron · Luc Laeven · Julien Pénasse · Yevhenii Usenko

This paper investigates two interrelated questions about historical banking crises: (1) whether bank losses during banking crises are primarily temporary or permanent in nature, and (2) whether policy …

Amir Kermani · Francis Wong

This paper estimates the racial/ethnic gap in realized housing returns using administrative data on individual housing transactions, and investigates the mechanisms that generate those gaps. The …

Giulia Brancaccio · Karam Kang

This paper investigates whether intermediaries in the U.S. municipal bond market strategically exploit product design to increase search frictions and, through that channel, capture rents. …

Josefin Meyer · Carmen M Reinhart · Christoph Trebesch

Two centuries of monthly prices for 1,552 foreign-currency government bonds traded in London and New York, matched bond-by-bond to a new archive of defaults and haircuts, show that external sovereign …

Francesco Saverio Gaudio

This paper documents a puzzle for canonical limited-participation models: when U.S. stock market participation rose from 31.6% to 53% between 1989 and 2007—a period also characterized by the Great …

Benjamin Hébert · Jesse Schreger

US court rulings in Republic of Argentina v. NML Capital moved the market-implied probability that Argentina would default on its restructured bonds without carrying any news about the Argentine …

Rajnish Mehra · Edward C. Prescott

This 1985 Journal of Monetary Economics paper by Rajnish Mehra and Edward C. Prescott documents that over 1889-1978 U.S. equities earned about seven percent real return per year on average while …

Andrei Shleifer · Robert W. Vishny

Shleifer and Vishny argue that textbook arbitrage -- "simultaneous purchase and sale of the same...security in two different markets," requiring no capital and entailing no risk -- does not describe …

Ronan C Lyons · Allison Shertzer · Rowena Gray · David Agorastos

Lyons, Shertzer, Gray, and Agorastos construct the first consistent, annual, quality-adjusted market rent and home sales price series for American cities spanning 1890–2006. The paper addresses a …

Laura Alfaro · Anusha Chari · Fabio Kanczuk

Brazil's IOF tax on foreign portfolio inflows was announced overnight and without warning, which makes it readable in stock prices. Two-day cumulative abnormal returns for listed Brazilian firms fall …

Anusha Chari · Jennifer Rhee

Measured firm by firm from accounting and stock-market data rather than imputed from national accounts, the marginal product of capital really is higher in poorer countries -- but inflation-adjusted …

Fumio Hayashi

Tobin's conjecture that investment depends on marginal q is derived from a general present-value-maximising firm problem with installation costs, giving an investment rule that depends on neither the …

Lars E. O. Svensson

This 1988 American Economic Review paper by Lars Svensson extends the law of comparative advantage from trade in goods to trade in any arbitrarily specified set of risky assets, complete or …

Karlye Dilts Stedman · Andrew Hanson

The paper asks why unconventional monetary policy (UMP) spillovers from the European Central Bank (ECB) to the U.S. Treasury yield curve vary so substantially over time, and whether the time-varying …

Greg Buchak · Gregor Matvos · Tomasz Piskorski · Amit Seru

This paper examines frictions in dealer intermediation in durable consumer goods markets, using iBuyers — technology-driven real estate companies such as Opendoor and Offerpad — as a lens. The central …