We argue that the cointegrating relation between dividends and consumption, a measure of long run consumption risks, is a key determinant of risk premia at all investment horizons. As the investment horizon increases, transitory risks disappear, and the asset's beta is dominated by long run...

The recently developed long-run risks asset pricing model shows that concerns about long-run expected growth and time-varying uncertainty (i.e., volatility) about future economic prospects drive asset prices. These two channels of economic risks can account for the risk premia and asset price...

In this paper we develop an economic asset pricing framework that identifies three key sources of risk that underlie the risk and return tradeoff in the economy: news to cashflows, news to expected returns, and news to aggregate volatility. A novel contribution of this paper is the inclusion of...

We argue that investor concerns about the exposure of asset returns to permanent movements in consumption levels are a key determinant of the risk and return relation in asset markets. We show that as the investment horizon increases, (i) the return's systematic risk exposure (consumption beta)...

How important are volatility fluctuations for asset prices and the macroeconomy? We find that a rise in macroeconomic volatility is associated with a rise in discount rates and a decline in consumption. To study the impact of volatility we provide a framework in which cashflow, discount-rate,...