We identify long-lived pricing errors through a model in which inattentive investors arrive stochastically to trade. The model’s parameters are structurally estimated using daily NYSE market-maker inventories, retail order flows, and prices. The estimated model fits empirical variances,...

The capital asset pricing model (CAPM) performs poorly overall as market risk (beta) is weakly related to 24-hour returns. This is because stock prices behave very differently with respect to their sensitivity to beta when markets are open for trading versus when they are closed. Stock returns...

Using the Baker, Bloom, and Davis (2013) news-based measure to capture economic policy uncertainty (EPU) in the United States, we find that EPU positively forecasts log excess market returns. A one-standard deviation increase in EPU is associated with a 1.5% increase in forecasted 3-month...

We show that global political uncertainty, measured by the U.S. election cycle, on average, leads to a fall in equity returns in fifty non-U.S. countries. At the same time, market volatilities rise, local currencies depreciate, and sovereign bond returns increase. The effect of global political...