We survey 384 CFOs and Treasurers, and conduct in-depth interviews with an additional two dozen, to determine the key factors that drive dividend and share repurchase policies. We find that managers are very reluctant to cut dividends, that dividends are smoothed through time, and that dividend...

Exchange rates depreciate by the difference between the domestic and foreign marginal utility growths. Exchange rates vary a lot , as much as 10% per year. However, equity premia imply that marginal utility growths vary much more, by at least 50% per year. This means that marginal utility...

We present an econometric method for estimating the parameters of a diffusion model from discretely sampled data. The estimator is transparent, adaptive, and inherits the asymptotic properties of the generally unattainable maximum likelihood estimator. We use this method to estimate a new...

Investors rebalance their portfolios as their views about expected returns and risk change. We use empirical measures of portfolio rebalancing to back out investors' views, specifically their views about the state of the economy. We show that aggregate portfolio rebalancing across equity sectors...

We propose a simple cross-sectional technique to extract daily factors from economic news released at different times and frequencies. Our approach can effectively handle the large number of different announcements that are relevant for tracking current economic conditions. We apply the...

We propose an empirical implementation of the consumption-investment problem using the martingale representation alternative to dynamic programming. Our method is based on the direct observation of state prices from options data. This greatly simplifies the investor's task of specifying the...

We present a novel approach to dynamic portfolio selection that is no more difficult to implement than the static Markowitz model. The idea is to expand the asset space to include simple (mechanically) managed portfolios and compute the optimal static portfolio in this extended asset space. The...

We extend range-based volatility estimation to the multivariate case. In particular, we propose a range-based covariance estimator motivated by a key financial economic consideration, the absence of arbitrage, in addition to statistical considerations. We show that this estimator is highly...

We present an econometric procedure for calibrating no-arbitrage term structure models in a way that is time-consistent and robust to measurement errors. Typical no-arbitrage models are time-inconsistent because their parameters are assumed constant for pricing purposes despite the fact that the...

We model the conditional mean and volatility of stock returns as a latent vector autoregressive (VAR) process to study the contemporaneous and intertemporal relationship between expected returns and risk in a flexible statistical framework and without relying on exogenous predictors. We find a...