We propose a network model of firm volatility in which the customers' growth rate shocks influence the growth rates of their suppliers, larger suppliers have more customers, and the strength of a customer-supplier link depends on the size of the customer firm. Even though all shocks are i.i.d.,...

The volatility of the price-dividend ratio on stocks, the predictability of stock returns, and the lack of predictability in dividend growth are commonly interpreted as evidence of substantial time-variation in risk premia. We construct the wealth-consumption ratio for the U.S., the...

type="main" <title type="main">ABSTRACT</title> <p>We propose a new definition of skill as general cognitive ability to pick stocks or time the market. We find evidence for stock picking in booms and market timing in recessions. Moreover, the same fund managers that pick stocks well in expansions also time the market well in...</p>

bond markets calibrated to match the increase in foreign ownership of U.S. Treasury and agency debt from 2000-2007 generates an increase in national price-rent ratios comparable to that observed in U.S. data over this period. Moreover, in a simulated transition for the period 2000-2009, the...

Many argue that home bias arises because home investors can predict home asset payoffs more accurately than foreigners can. But why does global information access not eliminate this asymmetry? We model investors, endowed with a small home information advantage, who choose what information to...

We study how the term structure of interest rates relates to mortgage choice at both household and aggregate levels. A simple utility framework of mortgage choice points to the long-term bond risk premium as distinct from the yield spread and the long yield as a theoretical determinant of...

Evidence of stock return predictability by financial ratios is still controversial, as documented by inconsistent results for in-sample and out-of-sample regressions and by substantial parameter instability. This paper shows that these seemingly incompatible results can be reconciled if the...

In a model with housing collateral, the ratio of housing wealth to human wealth shifts the conditional distribution of consumption growth. In the model, a decrease in house prices reduces the collateral value of housing, increases household exposure to idiosyncratic risk, reduces the amount of...