This review of the literature presents the main tools and results of research at the crossroads between finance and macroeconomics. The literature seeks to jointly analyze the economic cycle and fluctuations in financial-asset prices.Our article follows this approach:we offer a critical analysis...

We show that adjustment cost models with labor supply can explain both asset returns and business cycle facts when adjustment costs penalize the changes of investment. This conclusion stands in contrast to results obtained in the literature with adjustment costs that penalize the changes of capital.

This paper studies asset returns adopting an alternative strategy to assess a model s goodness of fit. Based on spectral analysis, this approach considers a model as an approximation to the process generating the observed data, and characterizes the dimensions for which the model provides a good...