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• Working Paper | 2019

  A Quantity-Driven Theory of Term Premiums and Exchange Rates

  Robin Greenwood, Samuel G. Hanson, Jeremy C. Stein and Adi Sunderam

  We develop a model in which risk-averse, specialized bond investors must be paid to absorb shocks to the supply and demand for long-term bonds in two currencies. Since long-term bonds and foreign exchange are both exposed to unexpected movements in short-term interest rates, our model naturally links the predictability of long-term bond returns to the predictability of foreign exchange returns. Specifically, a shift in the net supply of long-term bonds in one currency influences bond term premiums in both currencies as well as the foreign exchange rate between the two currencies. Our model matches several important empirical patterns, including the co-movement between exchange rates and bond term premiums as well as the finding that central banks' quantitative easing policies impact not only local-currency long-term yields, but also foreign exchange rates. We also show that this quantity-driven approach provides a unified account explaining both why foreign exchange tends to outperform when the foreign interest rates exceed domestic rates and why long-term bonds tend to outperform when the yield curve is steep.

  Keywords: term premium; exchange rate; Bonds; Currency; Theory;

  Citation:

  Greenwood, Robin, Samuel G. Hanson, Jeremy C. Stein, and Adi Sunderam. "A Quantity-Driven Theory of Term Premiums and Exchange Rates." Working Paper, November 2019.  View Details

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• Teaching Plan | HBS Case Collection | August 2019

  Wattpad

  John Deighton and Leora Kornfeld

  Citation:

  Deighton, John, and Leora Kornfeld. "Wattpad." Harvard Business School Teaching Plan 920-301, August 2019.  View Details

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• Article | Journal of Consumer Research | June 2019

  Learning to Become a Taste Expert

  Kathryn A. Latour and John A. Deighton

  Evidence suggests that consumers seek to become more expert about hedonic products to enhance their enjoyment of future consumption occasions. Current approaches to becoming expert center on cultivating an analytic mindset. In the present research the authors explore the benefit to enthusiasts of moving beyond analytics to cultivate a holistic style of processing. In the taste context the authors define holistic processing as nonverbal, imagery based, and involving narrative processing. The authors conduct qualitative interviews with taste experts (Master Sommeliers) to operationalize the holistic approach to hedonic learning and then test it against traditional analytic methods in a series of experiments across a range of hedonic products. The results suggest that hedonic learning follows a sequence of stages whose order matters and that the holistic stage is facilitated by attending to experience as a narrative event and by employing visual imagery. The results of this multi-method investigation have implications for both managers and academics interested in how consumers learn to become expert in hedonic product categories.

  Keywords: Learning; Experience and Expertise; Analysis; Perception;

  Citation:

  Latour, Kathryn A., and John A. Deighton. "Learning to Become a Taste Expert." Journal of Consumer Research 46, no. 1 (June 2019): 1–19.  View Details

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