I link an asset's risk premium to two characteristics of its underlying cash flow: covariance and duration. Using empirically novel estimates of both cash flow characteristics based exclusively on accounting earnings and aggregate consumption data, I examine their dynamic interaction in a...

We find that on average, an announcement of rising unemployment is good news for stocks during economic expansions and bad news during economic contractions. Unemployment news bundles three types of primitive information relevant for valuing stocks: information about future interest rates, the...

Knowledge of the one-month interest rate is useful in forecasting the sign, as well as the variance, of the excess return on stocks. The services of a portfolio manager who makes use of the forecasting model to shift funds between bills and stocks would be worth an annual management fee of 2...

Green and Hollifield (1992) argue that the presence of a dominant factor would result in extreme negative weights in mean-variance efficient portfolios even in the absence of estimation errors. In that case, imposing no-short-sale constraints should hurt, whereas empirical evidence is often to...

The stochastic discount factor (SDF) method provides a unified general framework for econometric analysis of asset-pricing models. There have been concerns that, compared to the classical beta method, the generality of the SDF method comes at the cost of efficiency in parameter estimation and...

When consumption betas of stocks are computed using year-over-year consumption growth based upon the fourth quarter, the consumption-based asset pricing model (CCAPM) explains the cross-section of stock returns as well as the <link rid="b25">Fama and French (1993)</link> three-factor model. The CCAPM's performance...