The present paper provides a new explanation for the dynamics of exchange rates based on conventions that prevail among market participants. The model relies on a two states Markov switching framework: a bull state and a bear state. In the bull state, agents are optimistic and put more weight on...

This paper provides global evidence supporting the hypothesis that expected return models are enhanced by the inclusion of variables that describe the evolution of book-to-market-changes in book value, changes in price, and net share issues. This conclusion is supported using data representing...

This paper documents a persistent structure in cryptocurrency returns and analyzes a broad set of characteristics that explain this structure. The results show that similarities in size, trading volume, age, consensus mechanism, and token industries drive the structure of cryptocurrency returns....

This paper investigates the determinants of nominal yields of government bonds in the eurozone. The pooled mean group (PMG) technique of cointegration is applied on both monthly and quarterly datasets to examine the major drivers of nominal yields of long-term government bonds in a set of 11...

During the global financial crisis, stressed market conditions led to skyrocketing corporate bond spreads that could not be explained by conventional modeling approaches. This paper builds on this observation and sheds light on time-variations in the relationship between systematic risk factors...

In this paper, we investigate the impact of market sentiment on cryptocurrency returns. To accomplish this, we use a novel dataset that captures a multitude of attitudes, moods, and emotions extracted from a vast amount of news and social media content. Our findings indicate that social media...

Carbon-intensive firms have been underperforming in the U.S. despite their higher carbon transition risk. The brown-minus-green return spread, or carbon return, is zero on average globally but varies significantly across countries with unexpected cash flow shocks and climate taste shifts. The...

We document the sharp increase in trading activity, gross and net notional outstanding, and overall premiums in the U.S. credit default swaps (CDS) market that took place during the 2023 debt ceiling episode. Unlike the periods leading up to the 2011 and 2013 debt ceiling events, we show that in...

As the debt ceiling episode unfolds, we highlight a sharp increase in trading activity and liquidity in the U.S. credit default swaps (CDS) market, as well as a spike in U.S. CDS premiums. Compared with the periods leading up to the 2011 and 2013 debt ceiling episodes, we show that elevated CDS...

We estimate the premium associated with time-varying market betas without using rolling betas or instruments. Instead, we use a new conditional-risk factor, which is a market timing strategy defined as the unexpected return on the market times the ex ante price of risk. The factor is a powerful...