We generalize the yield spanning condition in the bond literature to non-linear models and to exchange rates. In standard macro-finance models, no variable should predict yield or exchange rate changes once standard yield curve factors are controlled for. We provide novel evidence that this spanning condition is violated, with inflation as a common unspanned predictor of both bond and exchange rate returns. Investors’ incomplete information about the Federal Reserve’s monetary policy rule emerges as the key driver of this result. We find high inflation to be followed by unexpected monetary policy tightening, which leads to dollar appreciation and low bond returns. We explain these findings by a simple model that departs from full information rational expectations.

We estimate the market value of intangible capital around the world using a neoclassical investment model with two quasi-fixed inputs, physical and intangible capital. Across publicly listed firms in 80 economies (77 countries and 3 territories), installed intangible capital accounts for more than half of firm value, with wide variation across countries. Intangible capital is substantially more costly to adjust than physical capital in almost every country. This adjustment cost varies mainly across countries rather than across industries. Stronger intellectual property protection, shareholder rights, and director liability each lower the cost of adjusting intangible capital, while stronger creditor rights lower the cost of adjusting physical

capital.

What drives expected returns in the global corporate bond market? Using a comprehensive dataset spanning 112 countries and 35 currencies from 1997 to 2021, we show that equity-market information dominates bond-specific and accounting-based characteristics in predicting returns. The most robust predictors are the debt-equity spread and short-term equity momentum, highlighting imperfect integration between equity and credit markets. Building on this insight, we introduce a novel equity-implied mispricing (EIM) factor and find that a parsimonious two-factor model comprising the market factor and EIM outperforms established multifactor specifications. Furthermore, contrary to equity market evidence, global and currency-based factor models substantially outperform local models outside the US. We trace this to the “dollar bias”of international investors and show that currency, not geography, is the primary driver of risk integration in global corporate bonds.