We produce novel evidence for an equilibrium link between investors' disagreement, the market price of volatility and correlation, and the differential pricing of index and individual equity options. We show that belief disagreement is positively related to (i) the wedge between index and...

We study how the equilibrium risk-sharing of agents with heterogenous perceptions of aggregate consumption growth affects bond and stock returns. While credit spreads and their volatilities increase with the degree of heterogeneity, the decreasing risk premium on moderately levered equity can...

type="main" <title type="main">ABSTRACT</title> <p>We provide novel evidence for an equilibrium link between investors' disagreement, the market price of volatility and correlation, and the differential pricing of index and individual equity options. We show that belief disagreement is positively related to (i) the wedge...</p>

We propose a new modeling framework to study the asset pricing implications of learning under ambiguity aversion. In a continuous time partial information Lucas economy, we characterize analytically equilibrium equity returns and make the following observations. First, learning under ambiguity...

We study the equilibrium pricing effects of a sentiment for pessimism. Pessimism has the form of Knightian model uncertainty aversion for a neighborhood of indistinguishable model specifications that are constrained in their relative entropy from a given reference model. We fully characterise...

We present a geometric approach to discrete time multiperiod mean variance portfolio optimization that largely simplies the mathematical analysis and the economic interpretation of such model settings. We show that multiperiod mean variance optimal policies can be decomposed in an orthogonal set...

In a Lucas exchange economy with standard power utility, we study asset prices under learning and ambiguous information. In contrast with models featuring only learning or ambiguity, our model is successful in matching the equity premium, the interest rate, and the volatility of stock returns...

This paper proposes a robust semiparametric bootstrap method to estimate predictive distributions of GARCH-type models. The method is based on a robust estimation of parametric GARCH models and a robustified resampling scheme for GARCH residuals that controls bootstrap instability due to...

We develop a new framework for intertemporal portfolio choice when the covariance matrix of returns is stochastic. An important contribution of this framework is that it allows to derive optimal portfolio implications for economies in which the degree of correlation across different industries,...

We propose a multivariate nonparametric technique for generating reliable shortterm historical yield curve scenarios and confidence intervals. The approach is based on a Functional Gradient Descent (FGD) estimation of the conditional mean vector and covariance matrix of a multivariate interest...