We document a highly significant, strongly nonlinear dependence of stock and bond returns on past equity market volatility as measured by the VIX. We propose a new estimator for the shape of the nonlinear forecasting relationship that exploits additional variation in the cross section of...

The low-frequency movements of many economic variables play a prominent role in policy analysis and decision-making. We develop a robust estimation approach for these slow-moving trend processes, which is guided by a judicious choice of priors and is characterized by sparsity. We present some...

We propose regression-based estimators for beta representations of dynamic asset pricing models with an affine pricing kernel specification. We allow for state variables that are cross-sectional pricing factors, forecasting variables for the price of risk, and factors that are both. The...

We study regression-based estimators for beta representations of dynamic asset pricing models with affine and exponentially affine pricing kernel specifications. These estimators extend static cross-sectional asset pricing estimators to settings where prices of risk vary with observed state...

We estimate the elasticity of intertemporal substitution (EIS) - the elasticity of expected consumption growth with respect to variation in the real interest rate - using subjective expectations from the newly released FRBNY Survey of Consumer Expectations (SCE). This dataset is unique, since it...

How much do term premiums matter for explaining the dynamics of the term structure of interest rates? A lot. We characterize the expected path of nominal and real short-rates as well as inflation using the universe of U.S. surveys of professional forecasters covering more than 500 survey-horizon...

Portfolio sorting is ubiquitous in the empirical finance literature, where it has been widely used to identify pricing anomalies in different asset classes. Despite the popularity of portfolio sorting, little attention has been paid to the statistical properties of the procedure or to the...