We offer a theoretical framework to study the joint role played by investors ’ attention to news and learning uncertainty in determining asset prices. We show that asset return variance and risk premia increase quadratically with both attention and uncertainty. Our empirical investigation lends support to these theoretical predictions. The dynamic structure of the model yields a lead-lag relation between attention and uncertainty; this relation is found to enable “panic states, ” featuring spikes in volatilities and risk premia. During these panic states asset prices are very sensitive to news, consistent with empirical findings.

We use a structural factor-augmented vector autoregression (FAVAR) model and a large dataset of daily time series to study the impact of unconventional monetary policy on residential and non-residential real estate and related mar-kets. Our findings indicate that an expansionary unconventional monetary policy shock lowers key housing market interest rates; raises equity market returns for homebuilders and real estate investment trusts (REITs); reduces the cost to insure subprime mortgage-backed and commercial real estate debt; and lowers housing distress. Research findings also suggest that the estimated effects are generally large in magnitude and similar in size to those found for equity markets. Further, the impact of unconventional monetary policy shocks on housing markets differs in magnitude across risk-levels and US geographies. Finally, results indicate that successive rounds of monetary easing may be necessary during an extended period of economic weakness, in that the impact of an unconventional monetary shock at-tenuates rather quickly with an estimated half-life that is generally less than three months.