a simple extension of the long-run risk model …

overconfident about the signal. We find that, because overconfident traders introduce an additional source of risk, rational … bonds are an essential accompaniment of equity investment, as they serve to hedge this "sentiment risk." …

conditional equity premium and risk-free rate in equilibrium. Our empirical analysis shows that the equity premium appears to be …

factors does not improve forecast power. Portfolio optimization helps for risk control, but the different covariance models …

with low income uncertainty; for the high income risk worker, equity exposure rises until retirement. We also evaluate how … differences in social security benefits can influence retirement risk management …

help to explain the enormous counter-cyclical volatility of aggregate risk compensation in financial markets. To answer … these intermittent re-balancers more than double the effect of aggregate shocks on the time variation in risk premia by …

excessively pessimistic. We find that because irrational traders introduce an additional source of risk, rational investors reduce … "sentiment risk." The answer to the question posed in the title is: "There is little that rational investors can do optimally to …

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 …

It depends. If volatility fluctuates in a forecastable way, then volatility forecasts are useful for risk management …; hence the interest in volatility forecastability in the risk management literature. Volatility forecastability, however … volatility forecastability decays quickly with horizon. Volatility forecastability, although clearly of relevance for risk …