The idea that uncertainty about a firm’s long-run profitability could increase its stock valuation has been proposed by Pastor and Veronesi (2003) to explain a number of phenomena in financial markets. We further examine this idea by analyzing a simple valuation model for both stocks and...

This paper uses a macroeconometric model of the U.S. economy to analyze possible macroeconomic consequences of the large future federal government deficits. The analysis has the advantage of accounting for the endogeneity of the deficit. The results are bleak. Assuming no large tax increases or...

This paper investigates the impact of equity markets and top incomes on art prices. Using a long-term art market index that incorporates information on repeated sales since the eighteenth century, we demonstrate that both same-year and lagged equity market returns have a significant impact on...

This paper examines the potential impact of capital supply on security issuance. We focus on the role of convertible bond arbitrageurs as suppliers of capital to issuers of convertible bonds. We estimate a simultaneous equations model of demand and supply of convertible bond capital, linking the...

There have been a number of recent papers arguing that there has been considerable convergence in macro research and to the good. This paper considers the question whether what has been converged to is good. Has progress been made in understanding how the macro economy works?

Although the enactment of the Sarbanes-Oxley Act (SOX) received nearly unanimous congressional support, only a few years thereafter its wisdom was increasingly questioned and its supporters had to stave off attempts to recraft the legislation. The financial crisis of 2008 has sidelined efforts...

Despite portfolio construction based on expected utility theory and Markowitz mean-variance optimization having been the foundation of financial economic theory for more than 50 years, its practical application by financial advisors has been limited. Particularly troubling are the lack of a...

The Panic of 2007-2008 was a run on the sale and repurchase market (the “repo†market), which is a very large, short-term market that provides financing for a wide range of securitization activities and financial institutions. Repo transactions are collateralized, frequently with...

This paper examines whether recessions and booms are forecastable under the assumption that equity prices, housing prices, import prices, exports, and random shocks are not. Each of the 214 eight-quarter periods within the overall 1954:1-2009:1 period is examined regarding predictions of output...

We make the case for the U.S. government to issue a new security with a coupon tied to the United States’ current dollar GDP. This security might pay, for example, a coupon of one-trillionth of the GDP, and we propose the name 'Trill' be used to refer to this new security. This new debt...