Using a typical open macroeconomic model, we show that the UIP puzzle becomes more pronounced when the monetary policy rule is stricter against inflation. To determine the empirical validity of our model, we examine (the Taylor-rule-type) monetary policy rules and the slope coefficient in the...

Using a comprehensive dataset covering 34 countries from Datastream, we find that dividend-price ratio has a broad spectrum of forecasting abilities internationally. In some countries, such as the US, the dividend-price ratio is a powerful predictor of exclusively stock returns, whereas in...

Many studies have pointed out that the underlying relations and functions for the monetary model (e.g. the PPP relation, the money demand function, monetary policy rule, etc.) have undergone parameter instabilities and that the relation between exchange rates and macro fundamentals are unstable...

One goal of this paper is to develop an efficient Markov-Chain Monte Carlo (MCMC) algorithm for estimating an ARMA model with a regime-switching mean, based on a multimove sampler. Unlike the existing algorithm of Billio et al. (1999) based on a single-move sampler, our algorithm can achieve...

In this paper, we investigate the nature of structural breaks in inflation by estimating a version of the New Keynesian Phillips curve (NKPC) in the presence of a unit root in inflation. We show that, with a unit root in inflation, the NKPC implies an unobserved components model that consists of...

The literature documents that low stock returns are associated with increased volatility, but two competing explanations have proved difficult to disentangle. A negative return increases leverage making equity value more volatile. However, volatility feedback increases the risk premium when a...

Empirical evidence is presented to show that the dispersion in analysts' forecasts can explain part of the differences in cross-sectional stock returns. Generally, high dispersion stocks show relatively lower future returns than low dispersion stocks, and the difference in performance is...

Many studies have pointed out that the underlying relations and functions for the monetary model (e.g. the PPP relation, the money-demand function, monetary policy rule, etc.) have undergone parameter instabilities and that the relation between exchange rates and macro fundamentals is unstable...