shocks to aggregate uncertainty, I introduce a small, time-varying risk of economic disaster in a standard real business … risk of disaster does not affect the path of macroeconomic aggregates - a "separation theorem" between macroeconomic … variation in risk premia over time, are observationally equivalent to preference shocks. An increase in the perceived …

a simple extension of the long-run risk model …

Assessing the importance of uninsurable wage risk for individual financial choices faces two challenges. First, the … identification of the marginal effect requires a measure of at least one component of risk that cannot be diversified or avoided …. Moreover, measures of uninsurable wage risk must vary over time to eliminate unobserved heterogeneity. Second, evaluating the …

and volatility on investment strategies. Using the event-risk framework of Duffie, Pan, and Singleton (2000), we provide … analytical solutions to the optimal portfolio problem. Event risk dramatically affects the optimal strategy. An investor facing … event risk is less willing to take leveraged or short positions. The investor acts as if some portion of his wealth may …

-level equity portfolios. An application of the theory to the empirical results shows (a) large predicted levels of risky asset …

This paper develops an overlapping generations model of optimal rebalancing where agents differ in age and risk … directions, an aggregate risk tolerance effect that depends on the distribution of wealth, and an intertemporal hedging effect …. After a negative macroeconomic shock, relatively risk tolerant investors sell risky assets while more risk averse investors …

shock captures systematic risk, and that exposure to this shock helps price the cross section of stock returns including …