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Zoom URL: https://uni-frankfurt.zoom-x.de/j/63708832953?pwd=NTYMkcg14850i4xo3mghFwznYoVDTZ.1
Meeting ID: 637 0883 2953
Password: 032141

Abstract:

We analyze 18 quadrillion models for the joint pricing of corporate bond and equity returns. A Bayesian Model Averaging Stochastic Discount Factor, combining corporate bond and equity factor zoos, explains risk premia better than all existing models, both in- and out-of-sample. Key to this success is that multiple factors are noisy proxies for common underlying risks, and the BMA aggregates them optimally. The BMA-SDF, its conditional mean, and volatility, are persistent, track business cycle and times of heightened economic uncertainty, and predict future asset returns. Most of the information content of the corporate bond factor zoo stems from its ability to capture Treasury term structure risk.