"When risk-factor loadings are time-varying and unobservable, investors are forced to form beliefs about the levels of …. This paper develops an equilibrium model of learning about time-varying beta. In the model, the capital asset pricing model … (CAPM) works for investors' probability distribution. However, mis-pricing can be observed if econometricians estimate betas …

This paper examines how risk in trading activity can affect the volatility of asset prices. We look for this … swap spread tends to converge to a long-run level, although trading risk can sometimes cause the spread to diverge from … that level. -- convergence trading ; interest rate swaps ; swap spread ; repurchase contracts ; trading risk ; volatility …

the equity premium, Sharpe ratio, and risk aversion are also generally countercyclical. These findings survive several …