. We show that even a small wedge between borrowing costs and the risk-free return dramatically shrinks the demand for … consumption growth and equity returns is low at all ages, and that risk aversion estimates based on the standard excess return … borrowing costs and risk aversion, and the standard deviation of marginal utility growth is an order of magnitude smaller than …

enormous gains to trade when asset returns are calibrated to observed risk premia and all agents participate in asset markets …. The gains-to-trade puzzle is closely related to, but distinct from, the equity premium puzzle. High risk aversion merely … both puzzles. We also identify three reasons for limited international risk sharing. First, the requirement that asset …