This paper proposes an explanation for mixed evidence on the behaviors of markups. The key mechanism consists of two complementary channels of risk internalization that arise when firms face uninsurable business risks. One channel is based on passive risk consideration, through which firms raise...

We re-investigate the delayed overshooting puzzle. We find that delayed overshooting is primarily a phenomenon of the 1980s when the Fed was under the chairmanship of Paul Volcker. Related findings are as follows: (1) Uncovered interest parity fails to hold during the Volcker era and tends to...

This article investigates, both in finite samples and asymptotically, statistical inference on predictive regressions where time series are generated by present value models of stock prices. We show that regression-based tests, including robust tests such as the conditional test and the Q-test,...

In this paper, we consider who faces uninsurable business risks due to incomplete spanning of asset markets over stochastic goods market outcomes, and examine how the presence of the uninsurable business risks affects the producer's optimal pricing and production behaviours. Three key...

In this paper, we consider who faces uninsurable business risks due to incomplete spanning of asset markets over stochastic goods market outcomes, and examine how the presence of the uninsurable business risks affects the producer's optimal pricing and production behaviours. Three key...

In this paper, we consider a producer who faces uninsurable business risks due to incomplete spanning of asset markets over stochastic goods market outcomes, and examine how the presence of the uninsurable business risks affects the producer’s optimal pricing and production...

In a many-sector production economy where each sector’s output is used as input for every sector, a general equilibrium implies zero profit for everyone, whereas one market in excess demand implies positive profits for all others in their partial equilibrium. If more than one...

Fama’s (1984) volatility relations show that the risk premium in foreign exchange markets is more volatile than, and is negatively correlated with the expected rate of depreciation. This paper studies these relations from the perspective of goods markets frictions. Using a sticky-price general...

This paper investigates implications of nominal rigidities for the risk premium. We use Obstfeld and Rogoff (1998) type DSGE model equipped with nominal rigidities, imperfect market competitions, a production sector, and a money-in-the-utility function. For a monthly frequency, we generate...

This study finds evidence of an age restriction premium that is maintained over time and across varying market conditions. Prior research has demonstrated that the reduced uncertainty associated with private covenants and deed restrictions can be capitalized into value. Age-restricted...