Using high-frequency data, we estimate and characterize the evolution of the factor structure of global asset returns across aggregate equity, fixed income and exchange rates over the period 2007-2020. We show how the factor structure of asset returns evolves through time, providing clear...

Yield spreads on sovereign bonds represent market expectations for the economic performance of issuing countries. In the international financial market, yield spreads also reflect the extent to which the issuing countries are integrated into the global market. We analyze market integration and...

An insightful look at how to reform our broken financial system The financial crisis that unfolded in September 2008 transformed the United States and world economies. As each day's headlines brought stories of bank failures and rescues, government policies drawn and redrawn against the backdrop...

In my lectures at the annual Rothschild Caesarea Center summit in May this year, the annual convention of the Israel Economic Association, and an evening workshop of the Pinhas Sapir Center for Development, also this year, I made it my goal to shed some light on the way the credit crisis that...

We present a simple model of systemic risk and show how each financial institution’s contribution to systemic risk can be measured and priced. An institution’s contribution, denoted systemic expected shortfall (SES), is its propensity to be undercapitalized when the system as a whole is...

We present an economic model of systemic risk and show that each financial institution's contribution to systemic risk can be measured as its systemic expected shortfall (SES), i.e., its propensity to be undercapitalized when the system as a whole is undercapitalized. SES increases in the...

Why did the popping of the housing bubble bring the financial system - rather than just the housing sector of the economy - to its knees? The answer lies in two methods by which banks had evaded regulatory capital requirements. First, they had temporarily placed assets - such as securitized...