In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a downward sloping term structure of low-frequency variance...

We compare the performance of time-series (TS) and cross-sectional (CS) strategies based on past returns. While CS strategies are zero-net investment long/short strategies, TS strategies take on a time-varying net-long investment in risky assets. For individual stocks, the difference between the...

Corporate bonds with large increases in implied volatility over the past month underperform those with large decreases in implied volatility by 0.6% per month. In contrast to An, Ang, Bali, and Cakici (2014) who show that implied volatility changes carry information about fundamental news, our...

Using U.S. data for 1986-2017, the paper focuses on the impacts of macroeconomic risk factors and leverage on the performance of the various types of real estate exposure (direct, non-listed, and listed). The response of core funds to economic risk factors is akin to that of direct investments;...

We show that the difference between the natural rate of interest and the current level of monetary policy stance, which we label Convergence Gap (CG), contains information that is valuable for bond predictability. Adding CG in forecasting regressions of bond excess returns significantly raises...

This chapter surveys recent econometric methodologies for inference in large dimensional conditional factor models in finance. Changes in the business cycle and asset characteristics induce time variation in factor loadings and risk premia to be accounted for. The growing trend in the use of...

Central banks are under increased scrutiny because of the rapid growth in, and composition of, their balance sheets. Therefore, understanding the processes that shape these balance sheets and their consequences is crucial. We contribute by studying an extensive dataset of banks' liquidity uptake...

In this paper, we document evidence that downside betas tend to comove more than upside betas during a financial crisis, but upside betas tend to comove more than the downside betas during financial booms. We find that the asymmetry between Downside-Beta Comovement and Upside-Beta Comovement is...

This paper deals with identification and inference on the unobservable conditional factor space and its dimension in large unbalanced panels of asset returns. The model specification is nonparametric regarding the way the loadings vary in time as functions of common shocks and individual...

Modern open economy macro models assume the continuous adjustment of international portfolio allocation. We introduce gradual portfolio adjustment into a global equity market model. Our approach differs from related literature in two key dimensions. First, the time interval between portfolio...