1. Introduction In this post, I show how long run predictive regressions like the ones studied in Fama and French (1988) or Campbell (2003) can be understood using the wave function, a second order partial differential equation, rather than sums of … [Continue reading]
1. Introduction In this post, I solve a simple noisy rational expectations equilibrium model from Grossman and Stiglitz (1980) and then give a geometric interpretation of their result. First, in Section 2 I set up and solve a noisy rational … [Continue reading]
In this note, I show how to set up a local Mongo DB database to house CRSP-COMPUSTAT data. I grew tired of having to use SAS to access these data on the WRDS server. The coding language is difficult to use and the server is not particularly … [Continue reading]
1. Introduction In this post, I show how to compute corrected standard errors for a predictive regression with overlapping samples as in Hodrick (1992). First, in Section 2, I walk through a simple example which outlines the general empirical … [Continue reading]
1. Introduction I compare the covariance between the bond risk premium as captured by the Cochrane and Piazzesi (2005) factor and the stock risk premium as captured by the logarithm of the price to dividend ratio as used in, say, Shiller (2006). … [Continue reading]