This paper studies a multi-factor, two-country term structure and exchange rate model when a diversification effect for an international bond portfolio is expected. It shows that the diversification gain calls upon certain restrictions on the process of the stochastic discount factor in a...

We posit the opportunity cost of time required to manage risky investments, including conducting research and performance monitoring, as a potential explanation for the equity premium puzzle. An economic agent, who should allocate a limited amount of time to labor, leisure, and risky investment,...

Using genetic programming techniques to find technical trading rules, we find strong evidence of economically significant out-of-sample excess returns to those rules for each of six exchange rates over the period 1981–1995. Further, when the dollar/Deutsche mark rules are allowed to determine...