This paper integrates two strands of studies on consumer demand and consumption and provides a unified framework for analyzing consumer behavior employing an intertemporal two-stage budgeting procedure. We take a modified AIDS framework for the demand system and derive a general Euler equation...

This paper incorporates the systematic risk of regime shifts into a general equilibrium model of the term structure of interest rates. The model shows that there is a new source of time-variation in bond term premiums in the presence of regime shifts. This new component is a regime-switching...

This paper uses the flexible approach of Hamilton (2001) to investigate the nature of nonlinearities in the term structure. The paper reports clear evidence of nonlinearity, in contrast to the affine term structure model and consistent with recent claims in the literature. We find that there is...

We introduce continuous-time models that capture the salient features of the short-term interest rate and remain tractable for asset pricing applications. We extend classical specifications within and outside of the affine class to multi-factor settings with latent variables that are readily...

The term structure of interest rates is often summarized using a handful of yield factors that capture shifts in the yield curve. Despite their wide application in financial economics, very little is known on the time-series properties of the yield-factor volatilities. We examine three common...

In this paper we investigate portfolio coskewness using a quadratic market model as return generating process. It is shown that portfolios of small (large) firms have negative (positive) coskewness with market. An asset pricing model including coskewness is tested through the restrictions it...

Which pricing kernel restrictions are needed to make low dimensional Markov models consistent with given sets of predictions on aggregate stock-market fluctuations ? This paper develops theoretical test conditions addressing this and related reverse engineering issues arising within a fairly...