We originate risk and uncertainty shock measures through textual analysis of corporate annual reports and assess their implications for corporate policies. Risk shocks are followed by long-lasting diminishing leverage, investment, employment, dividend payouts, stock repurchases, and increasing...

This paper proposes a structural approach to long-horizon asset allocation. In particular, the investor draws inferences about asset returns from a vector autoregression (VAR) with economic restrictions on the intercept, slope, and covariance matrix implied by the long-run risk model of Bansal...

This paper motivates a novel predictor of currency returns and exchange rate changes, the lagged foreign interest rate. This variable is the dividend-to-price analogue in currency markets and its forecasting ability is incremental to established predictors. Currency-return predictability is...

This paper analyzes the performance of portfolio strategies that invest in noload, open-end U.S. domestic equity mutual funds, incorporating predictability in (i) manager skills, (ii) fund risk-loadings, and (iii) benchmark returns. Predictability in manager skills is found to be the dominant...

This paper proposes a comprehensive framework to address uncertainty about the correct factor model. Asset pricing inferences draw on a composite model that integrates over candidate models using posterior probabilities as weights. While the integrated model is weighted against deviations from...

This paper implements momentum among a host of market anomalies. Our investment universe consists of the 15 top (long-leg) and 15 bottom (short-leg) anomaly portfolios. The proposed active strategy buys (sells short) a subset of the top (bottom) anomaly portfolios based on past one-month return....