This paper develops a decentralized theory that determines the fair value of the yield-to-maturity of a bond or bond portfolio based purely on the near-term dynamics of the yield itself. The theory decomposes the yield into three components: its expected change, its risk premium, and its...

Asset pricing tests often replace ex ante return expectation with ex post realization. The large deviation between the two drastically weakens the power of these tests. This paper proposes to use analysts consensus price target for a stock as the market expectation of the stock's future price to...

Economic theory suggests that the magnitude and direction of a company's currency risk exposure depends crucially on its fundamental involvement in international trade. For U.S. industries, we find that the stock performance of import-oriented companies moves positively with the performance of...