Fluctuations in the aggregate balance sheets of financial intermediaries provide a window on the joint determination of asset prices and macroeconomic aggregates. We document that financial intermediary balance sheets contain strong predictive power for future excess returns on a broad set of...

Since the Federal Open Market Committee (FOMC) began announcing its policy decisions in 1994, U.S. stock returns have on average been more than thirty times larger on announcement days than on other days. Surprisingly, these abnormal returns are accrued before the policy announcement. The excess...

Purportedly consistent with "risk parity" (RP) asset allocation, recent studies document compelling "low risk" trading strategies that exploit a persistently negative relation between Sharpe ratios (SRs) and maturity along the U.S. Treasury (UST) term structure. This paper extends this evidence...

The paper has two main objectives. The first is to test for the presence of the size and book-to-market value effects in the Visegrad countries. Such effects have been found in the United States and many other developed stock markets. The Visegrad countries consist of the Czech Republic,...

The issue of whether the Fama and French (FF) three-factor model is consistent with the propositions of Modigliani and Miller (MM) (1958, 1963) has received surprisingly little attention. Yet, unless it is so, the model is at variance with the foundations of finance. Fama and French (FF) (1993,...

Prices and investors' behavior are heavily influenced by risk aversion. As it is unobservable, estimating risk aversion has been challenging for a long time. This paper proposes using a Machine Learning approach (a combination of Autoencoder and Long-Short Term Memory) to estimate the...

This paper addresses questions regarding the dimensionality of the stochastic discount factor and the selection of the best factors that enter it. We analyze these questions theoretically and empirically with a novel methodology which performs both (i) estimation of factor loadings and (ii) best...

Time horizon dimensions are added to asset pricing theory. Single period, static, arbitrage pricing theory (APT) describes single period risk with long horizon contributions in the frequency domain. Mean-reversion risks correspond to horizon variances. Mean-reversion risk is measured using the...

We estimate asset pricing models with multiple risks: long-run growth, long-run volatility, habit, and a residual. The Bayesian estimation accounts for the entire likelihood of consumption, dividends, and the price-dividend ratio. We find that the residual represents at least 80% of the variance...

In the past year, generative AI, led by Chat GPT by Open AI and Bard, a language experiment by Google, generated tremendous attention amongst the public. Their impact on finance, law and general productivity are difficulty to articulate with words. This paper aims to strengthen the...