We propose a theory of asset prices that emphasizes heterogeneous information as the main element determining prices of different securities. Our main analytical innovation is in formulating a model of noisy information aggregation through asset prices, which is parsimonious and tractable, yet...

We study the response of stock prices to monetary policy, distinguishing effects of exogenous shocks from "Delphic" shocks that reveal the Federal Reserve's macroeconomic forecasts. To decompose monetary policy surprises into these separate components we construct a measure of Federal Reserve...

Releases of key macroeconomic indicators are closely watched by financial markets. We investigate the role of expectation dispersion and economic uncertainty for the stock-market reaction to indicator releases. We find that the strength of the financial market response to news decreases with the...

I employ a classification of headlines from newspapers and wire services to examine whether stalemacroeconomic news affects stock prices. Unlike with individual stocks, the cost of obtaininginformation about major economic releases is relatively low. Thus, stock prices should adjust toeconomic...

We propose a multivariate test based on no-arbitrage conditions under the stochastic discount factor approach, which compares cross-sectional variation in equity returns to the cross-sectional variation in their conditional covariance with the discount factors. Using the multivariate generalized...

The index futures market allows for accurate measure of expected dividends from the aggregate stock market. This paper uses the dividend information exclusively extracted from the S&P 500 futures market to construct the implied dividend yield, implied capital gains and novel measures of cash...

Did the decline in inflation rates from 2012 to 2015 and the low levels of market-based inflation expectations lead to de-anchored inflation dynamics in the euro area? This paper is the first time-varying event study to investigate the reaction of inflation-linked swap (ILS) rates – a...

Motivated by standard portfolio theory, this paper incorporates ex-ante volatility estimates in the construction of winner-minus-loser stock momentum portfolio. I find that over the 1927-2015 period this leads to an increase in the Sharpe ratio from 0.34 to 1.14 and strongly reduced crash risk....

We discover a novel monetary policy shock that has a widespread impact on aggregate financial conditions and market confidence. Our shock can be summarized by the response of long-horizon yields to Federal Open Market Committee (FOMC) announcements; not only is it orthogonal to changes in the...

This study aims to clarify the mechanism of the surprising earnings-returns relation observed at the aggregate level by offering evidence from Japan. Unlike firm-level evidence, recent Macro-Accounting research reports that when earnings changes and stock returns of individual firms are...