We explore the link between the overnight fed funds rate, which is actively targeted by the Federal Reserve, and longer-maturity term fed funds rates. We develop a term-structure model which explicitly accounts for interest rate targeting and for the predictability of future target changes. The...

We explore the effects of overnight-rate targeting on nominal interest rates of longer maturities. In a realistic model of noisy targeting and infrequent target changes, expectations of future policy actions introduce persistent spreads between interest rates of different maturities. Some...

We assume the short-term rate to revert towards a central tendency which in, turn, is stochastically changing over time. We impose minimal restrictions on the joint behavior of the short-term rate and the central-tendency factor, and derive implications for the term structure of interest rates....

We assume that the instantaneous riskless rate reverts towards a central tendency which, in turn, is changing stochastically over time, and we derive a model of the term structure of interest rates. Our term-structure model implies that a linear combination of any two rates can be used as a...

We assume that the instantaneous riskless rate reverts toward a central tendency which, in turn, is changing stochastically over time. As a result, current short-term rates are not sufficient to predict future short-term rates movements, as it would be the case if the central tendency was...

Real money balances are held separately for consumption and portfolio reasons. When real balances are a state variable in the investor s optimization problem, there is a specific inflation-hedging portfolio. An investor hedges against inflation when the effect of real money holdings on the...

In a variety of realistic scenarios, some investors trade infrequently rather than continuously, basing their buy or sell decisions on current price levels. A acirc;not;Sprice barrieracirc;not;? is a price level at which a large number of investors either buy or sell securities. We analyze the...

We model an economy where stocks and bonds (consols) are traded by two types of agents: speculators, expected utility maximizers always present in the market, and infrequent traders, whose trading motives are not explicitly modeled. A solution technique for equilibrium prices is developed when...

In this paper we describe the cumulative distribution function of excess returns conditional on a broad set of predictors that summarize the state of the economy. We do so by estimating a sequence of conditional logit models over a grid of values of the response variable. Our method uncovers...

This paper examines newly-available intraday data from the interdealer government bond market to investigate the effects of economic-news announcements on prices, volume, and bid-ask spreads. By using expectational data we are able to separate out the impact of concurrent announcements. The use...