AI@CBS

Focusing on asset returns governed by a factor structure, the APT is a one-period model, in which preclusion of arbitrage over static portfolios of these assets leads to a linear relation between the expected return and its covariance with the factors. The APT, however, does not preclude arbitrage over dynamic portfolios. Consequently, applying the model to evaluate managed portfolios contradicts the no-arbitrage spirit of the model.

We use discounted cash flow analysis to measure the projected fiscal capacity of the U.S. federal government. We apply our valuation method to the CBO’s projections for the U.S. federal government’s primary deficits between 2022 and 2052 and projected debt outstanding in 2052. The discount rate for projected cash flows and future debt must include a GDP or market risk premium in recognition of the risk associated with future surpluses. Despite current low interest rates, we find that U.S. fiscal capacity is more limited than commonly thought.

Generative-AI is swiftly permeating every facet of our daily lives. Most notably, ChatGPT—a chatbot leveraging large language model (GPT-4) to understand and generate human-like language—has received global recognition, becoming one of the most widely adopted AI-based applications. Despite some limitations, generative AI technologies have not only affected consumer markets and business operations but also have the potential to revolutionize academic research.