Using survey forecasts, we find that systematic errors in expectations of long-term inflation and short-term nominal earnings growth are the main driver of prices and return puzzles for bonds and stocks. We demonstrate this by deriving and testing a single necessary and sufficient condition...

We study the effect of the home bias on international asset pricing by extending the core-satellite approach of active asset allocation to an equilibrium analysis. In this framework, investors combine a common core portfolio with an active investment in their home asset. In equilibrium, the core...

Investors' expectations on firms' cash flow growth can be biased (e.g. Bordalo et al. (2019)), yet we know little about how these biases and their asset pricing implications vary with forecast horizons. In this paper, I show that extreme expectations at all horizons beyond the current period...

We analyze the equilibrium in a two-tree (sector) economy with two regimes. The output of each tree is driven by a jump-diffusion process, and a downward jump in one sector of the economy can (but need not) trigger a shift to a regime where the likelihood of future jumps is generally higher....

Through extending a standard Grossman and Stiglitz (1980) noisy rational expectations economy by a heterogeneous signal structure with signal-specific differences in uncertainty, we show that price momentum as well as reversal are not intrinsically at odds with rational behavior. Differences in...

We develop a model that reproduces the average return and volatility spread between sin and non-sin stocks. Our investors do not necessarily boycott sin companies. Rather, they are open to invest in any company while trading off dividends against ethicalness. We show that when dividends and...

We develop a model that reproduces the return and volatility spread between sin and non-sin stocks, where investors trade off dividends with the ethical assessment of companies. We relax the assumption of boycott behaviour and investigate the role played by the dividend share of sin stocks on...

If agents are ambiguity-averse and can invest in productive assets, asset prices can robustly exhibit indeterminacy in the markets that open after the productive investment has been launched. For indeterminacy to occur, the aggregate supply of goods must appear in precise configurations but the...

This paper investigates the asset pricing implications of investor disagreement about the likelihood of a systematic disaster. I specify a general equilibrium model with multiple trees and heterogeneous beliefs about rare event risk, to understand how risk-sharing mechanisms affect equity and...

Current empirical asset pricing research on idiosyncratic volatility (IVOL), negatively related to cross-sectional expected returns, fails to take explicit account of risk that results from a shock to a network of economically related stocks. These stocks move together, and are therefore...