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Discussion Paper
What’s News?
Goldberg, Linda S. (2013-10-07)
Economic news moves markets. Most analyses find that economic news is incorporated quickly (within minutes) into asset prices, with some measurable persistence of these effects, and with some spillovers across national borders. Some types of announcements—for example, U.S. nonfarm payrolls announcements—generate much larger asset price responses than others. Generally, news that is more timely, is more precise (being subject to smaller revisions on average), and contains more information (being better able to better forecast GDP growth, inflation, or central bank policy decisions) has a ...
Liberty Street Economics , Paper 20131007

Working Paper
Asset Prices and Credit with Diagnostic Expectations
Cloyne, James; Jordà, Òscar; Singh, Sanjay R.; Taylor, Alan M. (2025-08-22)
Using long-run cross-country panel data, we document that (i) contemporaneous credit growth strongly predicts contemporaneous equity returns with positive sign, and (ii) lagged credit growth strongly predicts contemporaneous equity returns with negative sign. This correlation reversal is robust to added controls for contemporaneous and lagged consumption growth and these credit factors have greater explanatory power than the consumption factors. We find that a general equilibrium model with financial frictions and rational expectations fails to match the empirically estimated sign on ...
Working Paper Series , Paper 2025-15

Working Paper
Uncertainty, Stock Prices and Debt Structure: Evidence from the U.S.-China Trade War
Ozdagli, Ali; Wang, Jianlin (2022-08-19)
Using the recent U.S.-China trade war as a laboratory, we show that policy uncertainty shocks have a significant impact on stock prices. This impact is less negative for firms that heavily rely on bank debt whereas non-bank debt does not have a mitigating effect. Moreover, the mitigating effect of bank debt is concentrated among zombie firms. A zombie firm that derives half of its capital from bank debt has no negative stock price reaction to increased uncertainty. These results are consistent with bank debt providing insurance for zombie firms in bad economic times.
Working Papers , Paper 2212

Working Paper
How Can Asset Prices Value Exchange Rate Wedges?
Lewis, Karen K.; Liu, Edith X. (2022-11-07)
When available financial securities allow investors to optimally diversify risk across countries, standard theory implies that exchange rates should reflect this behavior. However, exchange rates observed in the data deviate from these predictions. In this paper, we develop a framework to value the welfare costs of these exchange rate wedges, as disciplined by asset returns. This framework applies to a general class of asset pricing and exchange rate models. We further decompose the value of these wedges into components, showing that the ability of goods markets to respond to financial ...
Finance and Economics Discussion Series , Paper 2022-075

Working Paper
The economic effects of a potential armed conflict over Taiwan
Neely, Christopher J. (2025-01-28)
This article examines the likely economic effects of a Chinese invasion or blockade of Taiwan for the U.S. and the world by considering historical precedents. Such a conflict would likely produce a flight-to-safety in the asset market, huge disruptions in international trade, and banking problems, and it would greatly exacerbate existing fiscal pressures. The authorities of the People’s Republic of China would probably try to sell U.S. and other western securities prior to a conflict to avoid sanctions on those assets. Such sales would be temporarily disruptive but would likely have only ...
Working Papers , Paper 2024-034

Report
Intergenerational Redistribution in the Great Recession
Heathcote, Jonathan; Krueger, Dirk; Rios-Rull, Jose-Victor; Glover, Andrew (2014-05-20)
We construct a stochastic overlapping-generations general equilibrium model in which households are subject to aggregate shocks that affect both wages and asset prices. We use a calibrated version of the model to quantify how the welfare costs of big recessions are distributed across different household age groups. The model predicts that younger cohorts fare better than older cohorts when the equilibrium decline in asset prices is large relative to the decline in wages. Asset price declines hurt the old, who rely on asset sales to finance consumption, but benefit the young, who purchase ...
Staff Report , Paper 498

Journal Article
The Economic Effects of a Potential Armed Conflict Over Taiwan
Neely, Christopher J. (2025-02-26)
This article examines the likely economic effects of a Chinese invasion or blockade of Taiwan for the U.S. and the world by considering historical precedents. Such a conflict would likely produce a flight-to-safety in the asset market, huge disruptions in international trade, and banking problems, and it would greatly exacerbate existing fiscal pressures. The authorities of the People’s Republic of China would probably try to sell U.S. and other western securities prior to a conflict to avoid sanctions on those assets. Such sales would be temporarily disruptive but would likely have only ...
Review , Volume 107 , Issue 3 , Pages 1-23

Working Paper
Risk Management in Monetary Policy: A Review with Asset Pricing Implications
CIeslak, Anna; Hansen, Stephen; Pang, Hao (2026-09-01)
We review recent research on how the Fed's risk-management approach shapes the overall policy stance and how it affects financial market conditions. The evidence shows that the policy stance contains a forward-looking, conditional component that has long been an integral part of the Fed's policymaking toolkit. Asymmetric forward-looking policy tilts—motivated by risk-management considerations and revealed via the Fed’s communication—complement and extend beyond the effects of direct policy actions. Drawing on the transcripts of FOMC meetings between 1976 and 2019, we provide an ...
Working Papers , Paper 2630

Working Paper
Turnover Liquidity and the Transmission of Monetary Policy
Zhang, Shengxing; Lagos, Ricardo (2016-05-03)
We provide empirical evidence of a novel liquidity-based transmission mechanism through which monetary policy influences asset markets, develop a model of this mechanism, and assess the ability of the quantitative theory to match the evidence.
Working Papers , Paper 734

Report
Asset price effects of peer benchmarking: evidence from a natural experiment
Pedraza, Alvaro; Acharya, Sushant (2015-05-01)
We estimate the effects of peer benchmarking by institutional investors on asset prices. To identify trades purely due to peer benchmarking as separate from those based on fundamentals or private information, we exploit a natural experiment involving a change in a government-imposed underperformance penalty applicable to Colombian pension funds. This change in regulation is orthogonal to stock fundamentals and only affects incentives to track peer portfolios, allowing us to identify the component of demand that is caused by peer benchmarking. We find that these peer effects generate excess ...
Staff Reports , Paper 727

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