Using a panel logit framework, the paper provides an estimate of the likelihood of a house price correction in 18 OECD countries. The analysis shows that a simple measure of the degree of house price overvaluation contains a lot of information about subsequent price reversals.
Using the prices of crude oil futures contracts, we construct the term structure of crude oil convenience yields out to one-year maturity. The crude oil convenience yield can be interpreted as the interest rate, denominated in barrels of oil, for borrowing a single barrel of oil, and it measures the value of storing crude oil over the borrowing period.
An important channel in the transmission of monetary policy is the relationship between the short-term policy rate and long-term interest rates. Using a new term-structure model, the authors show that the variation in long-term interest rates over time consists of two components: one representing investor expectations of future policy rates, and another reflecting a term-structure risk premium that compensates investors for holding a risky asset. The time variation in the term-structure risk premium is countercyclical and largely determined by global macroeconomic conditions. As a result, long-term rates are pushed up during recessions and down during times of expansion. This is an important phenomenon that central banks need to take into account when using short-term rates as a policy tool.
We construct a multi-country affine term structure model that contains unspanned macroeconomic and foreign exchange risks. The canonical version of the model is derived and is shown to be easy to estimate.
We present a new matrix-logarithm model of the realized covariance matrix of stock returns. The model uses latent factors which are functions of both lagged volatility and returns.
“Forecasting Multivariate Realized Stock Market Volatility” (with Keith Vorkink, Brigham Young University), Journal of Econometrics 160 (1), 2011, pp.93-101.
“Global Private Information in International Equity Markets” (with Rui Albuquerque, Boston University and Martin Schneider, Stanford University), Journal of Financial Economics 94, 2009, pp. 18-46.
“The Monetary Origins of Asymmetric Information in International Equity Markets” (with Clara Vega, Board of Governors of the Federal Reserve), Journal of International Money and Finance 27, 2008, pp.1029-1055 (lead article).
“International Equity Flows and Returns: A Quantitative Equilibrium Approach” (with Rui Albuquerque, Boston University and Martin Schneider, Stanford University), Review of Economic Studies 74, 2007, pp.1-30 (lead article).
Other Publications
“In the Know: Global Private Information in International Equity Markets” Canadian Investment Review, Summer 2007.
Other Research
“A Multi-Country Term Structure Model with Economic Restrictions and Unspanned Risks” (with Antonio Diez de los Rios, Bank of Canada)
“Conditional Currency Hedging and Asset Market Shocks”
“The Foreign Exchange Risk Premium Over the Long Run”
Work in Progress
“The Crude Oil Futures Curve, the U.S. Term Structure, and Global Macroeconomic Fundamentals” (with Ron Alquist, Bank of Canada and Antonio Diez de los Rios, Bank of Canada).
“The Government of Canada Yield Curve, 1936 – 2012” (with Selma Chaker and Antonio Diez de los Rios, Bank of Canada).
“Cointegration, Beliefs and Learning about the Exchange Rate over the Long Run: A Portfolio Perspective” (with Michela Verardo, LSE).
