Discussion Papers

Portfolio choice involves substituting across many assets at once, complicating inference about asset demand. An elementary condition often captures...

Commonly used frequentist estimation methods for linear factor models of asset returns are invalidated by weak and spurious factors. The problem is...

The equity premium has conventionally been defined as the return on stocks minus the return on bills. We decompose this conventional definition into...

We analyze the impact of financial market fragmentation when traders differ in terms of market access and information about the asset payoff. Agents...

We highlight the multiplier role of (public) safe assets by studying a model of a bank’s balance sheet. The bank optimally constructs a portfolio of...

Using an equilibrium network model and a large international panel of cross-border trade, we analyse empirically the drivers of foreign currency...

We introduce discounted alpha - a novel framework for equity valuation. By correcting market prices rather than discounting long-horizon cash flows...

We analyse how public health insurance affects private insurance markets in mixed public-private systems. Extending the standard selection framework...

We provide a novel priced Wold representation that, using the pricing restrictions of a large cross-section of asset returns, sharply identifies...

We provide a powerful new predictor of the equity premium: Smoothed past overnight market returns strongly negatively forecast the quarterly close-to...

Financial regulations rely on regulator-controlled models to generate probabilistic forecasts which determine firm constraints. I refer to these...

Factor regressions provide a model-agnostic way to identify what drives Treasury yields, but not which investors respond. We develop an equilibrium...

Many economic questions require estimating the price effect of demand shifts (multipliers) in the bond market. Corporate bonds have salient...

Can financial intermediaries help solve the externalities of the real-economy, even when all investors are purely return-driven? This paper develops a...

We study empirically and theoretically the effects of international financial flows on resource allocation. Using the universe of firms in Hungary, we...

We show that the standard econometric framework typically yields inconsistent estimates of price discovery measures in the presence of richer market...