• External Habit in a Production Economy: a Model of Asset Prices and Consumption Volatility Risk

  Review of Financial Studies 2017; 30 (8): 2890-2932
  
  RFS Abstract   Working Paper (ssrn)  [February 2017] Online Appendix  Cite (Bibtex)
  
  Code: Baseline Projection and Internal Habit, Discretized Projection version,, Continuous Projection version, Dynare++ Version, 2-period model
  
  A simple RBC model with external habit and adjustment costs matches all the asset prices facts in Campbell-Cochrane, the consumption volatility facts in Bansal-Kiku-Yaron, and basic business cycle moments.  The model also generates endogenous consumption volatility risk.  Precautionary savings motives lead to concave consumption and countercyclical consumption volatility.  External habit amplifies this channel.
  
  
  

Working Papers

• Selection Bias and the Cross-Section of Expected Returns
  

  - with Tom Zimmermann
  
  To be presented at AFA 2018
  
  Paper (ssrn)  [March 2017], Cite (Bibtex)
  
  Data mining bias is surprisingly small, accounting for a modest 10-15% of the typical in-sample return.  This small bias implies that the decline in anomaly returns post-sample is due to traders eliminating mispricing.  Our bias adjustment is robust and works in a wide variety of simulations of publication bias. 
  
  
  
  
  

• A Likelihood-Based Comparison of Macro Asset Pricing Models
  

  - with Rebecca Wasyk and Fabian Winkler
  

Paper (ssrn)  [April 2017], Cite (Bibtex)

We Bayesian-estimate a model where price/dividends depend on long run risks, habit, and a persistent residual.  The residual is dominant, showing that something other than long run risks and habit is the primary driver of market volatility. 







• Semi-Parametric Restrictions on Production-Based Asset Pricing Models
  

  Paper (ssrn)  [April 2016]  Slides
  
  Matching the data on asset prices requires either extremely volatile IST shocks or huge capital adjustment costs.  Those parameters imply a very low EIS.  These restrictions apply regardless of many other details of the model. 
  
  

  
  
  

• A General Equilibrium Model of the Value Premium with Time-Varying Risk Premia
  

  Paper (ssrn)  [July 2017]  Slides Code
  
  This paper presents a quantitative GE model of the value premium and equity premium.  Value firms (1) have higher cash flow growth and thus (2) are more exposed to consumption volatility fluctuations.  Empirical evidence supports (1) and (2).