Returns to currency carry and momentum are compensations for the risk of global interest rate uncertainty (IRU), with risk exposures explaining 92% of their cross-sectional return variations. The unified explanation stems from its impact on financial constraints of FX intermediaries. Higher...

This article develops a novel nonparametric time-varying auto-regressive distributed-lag model to estimate and test the persistence of inflation. To characterize the temporal instability of persistence in the inflation process, our proposed model allows for time-varying coefficients with...

According to present-value models, a financial valuation ratio should predict future stock returns or cash flows but empirically shows little power. This paper develops insights about stock return predictability and reconciles the contradicting findings. We decompose a financial ratio into (1) a...

This paper proposes a novel semiparametric time-varying model for long-horizon predictive regressions in which the coefficients are allowed to change over time with unspecified functional forms. A linear projection method is employed to deal with the embedded endogeneity issue. We pursue an...

This appendix to “Nonparametric Modeling for the Time-Varying Persistence of Inflation” presents supplementary results using an alternative measure of inflation based on the GDP deflator. First, we provide the local linear estimation results of time-varying inflation persistence using...