Contributions published at Finance (Henrik Hasseltoft)

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Using recent advances in news analytics, we construct an empirical measure of aggregate news dispersion and study how a dispersed news flow a↵ects investors and aggregate stock returns. Our measure reflects the polarization of news across firms, based on millions of company-specific news items. We find that news dispersion i) predicts investor disagreement positively, ii) is positively related to turnover, iii) predicts aggregate stock returns negatively, and iv) predicts realized variance positively. The e↵ects of news dispersion are consistent with models of disagreement and short-sales constraints and support the idea that a dispersed news flow represents a fundamental reason for why investors disagree.

We identify local and global factors across international bond markets that are poorly spanned by the cross-section of yields but have strong forecasting power for future bond excess returns. Local and global factors are jointly signicant predictors of bond returns, where the global factor is closely linked to US bond risk premia and international business cycles. Motivated by our results, we estimate a no-arbitrage ane term structure model for each country in which movements in risk premia are driven by one local and one global factor. Yield loadings for the two factors are estimated to be close to zero while shocks to risk premia account for a small fraction of yield variance. This suggests that the cross-section of yields conveys little information about the return-forecasting factors. We show that shocks to global risk premia cause osetting movements in expected returns and expected future short-term interest rates, leaving current yields little affected. Furthermore, correlations between international bond risk premia have increased over time, indicating an increase in integration between markets.

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We document an inverse relation between stock-bond correlations and correlations of growth and inflation. We find that rising inflation uncertainty lowers stock prices but can either lower or raise nominal bond prices depending on whether inflation is counter- or procyclical. We show that the time-varying comovement of growth and inflation has important implications for how inflation impacts asset prices. We explain our findings in a long-run risk model with non-neutral inflation shocks and regime shifts, allowing for countercyclical and procyclical inflation regimes. The model can produce an upward-sloping real yield curve and rationally explains the so-called Fed-model. Finally, inflation and monetary policy shocks were important drivers of stock-bond correlations during the countercyclical period 1965-2000 while output shocks dominated during the procyclical period 2000-2011.

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I evaluate whether the so-called long-run risk framework can jointly explain key features of both equity and bond markets as well as the interaction between asset prices and the macroeconomy. I find that shocks to expected consumption growth and time-varying macroeconomic volatility can account for the level of risk premia and its variation over time in both markets. The results suggest a common set of macroeconomic risk factors operating in equity and bond markets. I estimate the model using a simulation estimator which accounts for time-aggregation of consumption growth and utilizes a rich set of moment conditions.

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In this paper we evaluate the Swiss-Franc (CHF) exchange rate movements during the Years of 2003 till 2011. We give an insight in the Swiss Economy and the tasks of the SNB (Swiss-National-Bank). This will equip us with the instruments and goals of the SNB. We use the "Uncovered Interest Rate Parity" model in our theoretical part to conclude that movements were a reversal to the mean and are therefore economically reasonable. Still this result is a contrast to the economical assessment of the SNB. We study further the "Purchasing Power Parity" to show the contrast in results we get to those from before. We examine what the circumstances were for a correction. That implies taking a look at the various crises of the past years, such as the Global-Financial - and Euro Crisis. We conclude that all crises were the extension of just one core crisis. An interesting insight we also find is that the great volatility shocks that occurred during these crises had nearly no influence on our model. At last we critically access the SNB actions and give an outlook for the near future.

This paper presents an equilibrium model that provides a rational explanation for two features of data that have been considered puzzling: The positive relation between US dividend yields and nominal interest rates, often called the Fed-model, and the time-varying correlation of US stock and bond returns. Key ingredients are time-varying first and second moments of consumption growth, inflation, and dividend growth in conjunction with Epstein-Zin and Weil recursive preferences. Historically in the US, inflation has signalled low future consumption growth. The representative agent therefore dislikes positive inflation shocks and demands a positive risk premium for holding assets that are poor inflation hedges, such as equity and nominal bonds. As a result, risk premiums on equity and nominal bonds comove positively through their exposure to macroeconomic volatility. This generates a positive correlation between dividend yields and nominal yields and between stock and bond returns. High levels of macro volatility in the late 1970s and early 1980s caused stock and bond returns to comove strongly. The subsequent moderation in aggregate economic risk has brought correlations lower. The model is able to produce correlations that can switch sign by including the covariances between consumption growth, inflation, and dividend growth as state variables.

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