This paper uses restrictions implied by cointegration to identify the permanent and transitory elements (the “trendÔand “cyclicalÔ) of household asset wealth. We focus our attention on a cointegrated system of three aggregate variables that are clearly central to the behavior of household spending: consumption, asset wealth and labor earnings. Because this cointegrated system is motivated by a ...

The study of asset price characteristics of stochastic growth models such as the riskfree interest rate, equity premium and the Sharpe-ratio has been limited by the lack of global and accurate methods to solve dynamic optimization models. In this paper a stochastic version of a dynamic programming method with adaptive grid scheme is applied to compute the asset price characteristics of a stocha...

These shortages have been a perennial problem in emerging markets, where many of their economic perils and idiosyncrasies stem from this feature. But we are now seeing a shortage on a global scale. It probably began with the meltdown of a substantial share of Japanese assets in the early 1990s, it was exacerbated by European stagnation and the collective emerging market crises of the late 1990s...

This paper shows that consumption-based asset pricing theory imposes no testable restrictions on either macroeconomic or cross-sectional data if one allows for uninsurable idiosyncratic income shocks which are persistent and not normally distributed. More precisely, this paper shows that any “observed” joint process of arbitrage-free asset prices and payoffs, aggregate consumption, and moments ...

We establish several new findings on the relation between open interest in commodity markets and asset returns. High commodity market activity, as measured by high open-interest growth, predicts high commodity returns and low bond returns. Openinterest growth is a more powerful and robust predictor of commodity returns than other known predictors such as the short rate, the yield spread, the ba...

This paper studies asset allocation decisions in the presence of regime switching in asset returns. We find evidence that four separate regimes characterized as crash, slow growth, bull and recovery states are required to capture the joint distribution of stock and bond returns. Optimal asset allocations vary considerably across these states and change over time as investors revise their estima...

The École Polytechnique Fédérale de Lausanne (EPFL) is currently using a Web-based experimentation environment to support laboratory activities in engineering education. The key service for the acceptance of the learning modalities and the appropriation of the environment by the students is a shared electronic notebook called the eJournal. This service is not only used by students to perform th...

We put forward a general equilibrium model that links the cross-section variation of expected returns to …rms’life cycle dynamics. In the model all assets have the same exposure to short-run consumption risks, but di¤er in their exposure to long-run consumption risks (Bansal and Yaron (2004)). An econometrician who uses conditional CAPM regression to predict asset returns will obtain higher for...