We propose regression based estimators for beta representations of dynamic asset pricing models with an affine pricing kernel specification. We allow for state variables that are cross sectional pricing factors, forecasting variables for the price of risk, and factors that are both. The...

We present a model of equity trading with informed and uninformed investors where informed investors act upon firm-specific private information and marketwide private information. The model is used to structurally identify the component of order flow that is due to marketwide private...

We quantify the sources of risk in currency returns as a first step toward understanding the returns reported for the carry trade. To do this, we develop and estimate an empirical model of exchange rate dynamics using daily data for four currencies relative to the US dollar: the Australian...

This review paper articulates the relationship between prediction market data and event studies, with a special focus on applications in political economy. Event studies have been used to address a variety of political economy questions from the economic effects of party control of government to...

We provide empirical evidence that risk sharing enhances specialization in production. To the best of our knowledge, this well-established and important theoretical proposition has not been tested before. Our empirical procedure is summarized as follows. First, we construct a measure of...

This paper proposes a dynamic risk-based model that captures the high expected returns on value stocks relative to growth stocks, and the failure of the capital asset pricing model to explain these expected returns. To model the difference between value and growth stocks, we introduce a...

Among the most important pieces of empirical evidence against the standard representative agent, consumption-based asset pricing paradigm are the formidable unconditional Euler equation errors the model produces for cross-sections of asset returns. Here we ask whether calibrated leading asset...

I study the constrained efficient allocations of a simple model of risk sharing and capital flows across countries assuming that each country cannot commit to fully repay its contract obligations. In the model, the degree of risk sharing and the amount of investment are interdependent. It is...

This paper offers an informational explanation for asset price booms and crashes. If market fundamentals change, but the length of this process of change is unknown, market participants try to learn about it by observing market outcomes. This learning generates a boom and a crash, which we call...

This paper analyses the impact of a minimum price variation (tick) and time priority on the quote dynamics and on trading costs when competition for the order flow is dynamic. It finds that convergence to competitive prices can take time and that the speed of convergence is influenced by the...