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Journal Article

Does Duration Extension Enhance Long-Term Expected Returns?

In the past, investors have been rewarded for extending the duration of their fixed income holdings when the yield curve is upward sloping, but have not been rewarded (or have even been punished) when the curve is inverted.

Journal Article

When Do Bond Markets Reward Investors for Interest Rate Risk?

Fixed-income portfolio managers pay considerable attention to risk/return tradeoffs.

Working Paper

Financing Investment With Long-Term Debt and Uncertainty Shocks

This paper proposes a model of financing and investment for firms that attempts to explain both the weak correlation of Tobin’s Q with investment, and the higher correlation of bond yields with investment.

Journal Article

How Sovereign Is Sovereign Credit Risk?

Is sovereign credit risk primarily a country-specific type of risk, or is it driven by global macroeconomic forces external to the country? Understanding the nature of sovereign credit risk is of key importance given the large and rapidly increasing size of the sovereign debt markets.

Journal Article

Stocks vs. Bonds: Explaining the Equity Risk Premium

From the 19th century through the mid-20th century, the dividend yield (dividends/price) and earnings yield (earnings/price) on stocks generally exceeded the yield on long-term U.S.

Book

The Valuation of PAC Bonds Without Complex Models

Using static yields on mortgage securities is insufficient to make good investment choices. We present a simple model that can be useful in identifying value across at least one popular class of CMO securities: the Planned Amortization Class bond.

Perspective

Repurchases are the Devil’s Work! (not…)

A seemingly large amount of stock buybacks in recent years has prompted many to claim that buybacks have come at the expense of new investment. Our latest paper shows why neither the theory nor the evidence supports this view.

Journal Article

Modeling Sovereign Yield Spreads: A Case Study of Russian Debt

In this paper, we construct a model for pricing sovereign debt that accounts for the risks of both default and restructuring, and allows for compensation for illiquidity.

Journal Article

Market Rate Expectations and Forward Rates

Three main forces determine the term structure of forward rates: the market’s rate expectations; required bond risk premia; and the convexity bias.

Journal Article

Buyback Derangement Syndrome

Winner of an “Outstanding Article” award in the 20th Annual Bernstein Fabozzi/Jacobs Levy Awards. A seemingly large amount of stock buybacks in recent years has prompted many to claim that buybacks have come at the expense of new investment. Our latest paper shows why neither the theory nor the evidence supports this view.