Building on the Kaplan-Violante two-account incomplete-markets model, this manuscript shows that once idiosyncratic risk is assumed to rise when asset valuations fall, the aggregate value of each …
Online FirstJournal of Money, Credit and BankingOnline 4 Jun 2026
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 …
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 …
Shifts in global risk appetite move not just the middle of the emerging-market capital-flow and return distributions but their left tails, and usually the left tail more. Estimating panel quantile …
PublishedClassicReview of Financial StudiesOnline 30 Aug 2011Published Nov 2011
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 …
Online FirstJournal of Money, Credit and BankingOnline 2 Aug 2026
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 …
Online FirstJournal of Money, Credit and BankingOnline 2 Dec 2025
Using security-level data on individual corporate bond prices and the Bank of England's published purchase quantities across its gilt purchase programs (QE1: £200bn, QE2: £125bn, QE3: £50bn, QE4: …
This 2012 American Economic Review paper by Simon Gilchrist and Egon Zakrajšek constructs a new corporate-bond credit spread index -- the "GZ spread" -- from a large panel of secondary-market bond …
In a small open economy where a risk-averse government borrows from risk-neutral lenders using only non-contingent one-period bonds, default happens in equilibrium and happens in *recessions* -- the …
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 …
PublishedJournal of Political EconomyOnline 2 Apr 2026Published Aug 2026
The paper develops an asset demand system to analyze, jointly and across all countries, how international portfolio holdings and flows, exchange rates, short-term rates, long-term yields, and equity …
PublishedJournal of Political EconomyOnline 1 Mar 2025Published Dec 2025
This paper studies three centuries of U.K. fiscal history to understand the fiscal implications of safe asset supplier status — what the authors call "exorbitant privilege" — and how it can be gained …
The repeated transition method solves rich heterogeneous-agent models globally and without perfect foresight by exploiting the ergodicity of a long simulated path -- matching periods with similar …
PublishedAmerican Economic ReviewPublished Jun 2026
This paper develops a revealed-preference theory that uses asset-market data to identify whether investors have a preference for early resolution of uncertainty (PER), a property of non-expected …
PublishedClassicThe Journal of FinanceOnline 11 May 2016Published Jun 2016
Emerging-market governments that borrow in their own currency still pay a measurable default premium: stripping out currency risk with cross-currency swaps leaves a "local currency credit spread" …
PublishedClassicQuarterly Journal of EconomicsPublished Feb 1994
Using simple two-variable autoregressions of consumption and GNP, and of dividends and stock prices, Cochrane shows that a shock to GNP (or to stock prices) that leaves consumption (or dividends) …
This review organizes the quantitative macroeconomics literature on household heterogeneity around the "standard incomplete markets" model, asking what sources of individual risk matter most, what …
This paper builds a flexible-price model in which money's liquidity premium keeps real interest rates from falling when idiosyncratic risk rises, so money reduces investment rather than stabilizing …
PublishedClassicReview of Economic StudiesOnline 25 Sep 2021Published May 2022
This paper shows that spikes in idiosyncratic risk premiums can generate quantitatively plausible recessions -- with employment, consumption, and investment all falling together -- because the risk …
PublishedClassicQuarterly Journal of EconomicsOnline 31 Jan 2022Published Jul 2022
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 …
The first present-value estimates of creditor losses for all 180 sovereign debt restructurings with foreign banks and bondholders between 1978 and 2010 -- average haircut 37%, with half the cases …
The strength of the US dollar, the size of covered interest parity deviations and the growth of dollar-denominated cross-border bank lending move together in what the authors call a triangular …
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 …
PublishedJournal of Political EconomyOnline 30 Apr 2026Published Jul 2026
This paper proposes and measures the zero-beta rate — the expected return on a portfolio of stocks with zero market beta, constructed to be orthogonal to the SDF innovations spanned by standard …
PublishedJournal of Political EconomyOnline 1 Aug 2025Published May 2026
This paper asks whether the U.S. government exploits its market power as the dominant global supplier of safe assets when setting the quantity of public debt, and quantifies the macroeconomic …
Most heterogeneous-agent New Keynesian (HANK) models take household portfolios as exogenously fixed. This paper develops a sequence-space method for solving instead for endogenous, risk-hedging …