The equity variance risk premium is the expected compensation earned for selling variance risk in equity markets. The variance risk premium is positive and shows moderate persistence. High variance risk premiums coincide with the left tail of the consumption growth distribution shifting down....

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...

The paper estimates and examines the empirical plausibiltiy of asset pricing models that attempt to explain features of financial markets such as the size of the equity premium and the volatility of the stock market. In one model, the long run risks model of Bansal and Yaron (2004), low...

We identify the relative importance of changes in the conditional variance of fundamentals (which we call "uncertainty") and changes in risk aversion ("risk" for short) in the determination of the term structure, equity prices and risk premiums. Theoretically, we introduce persistent...

Will the stock market provide high returns in the future as it has in the past? The average US stock return in the postwar period has been about 8% above treasury bill rates. But that average is poorly measured: The standard confidence interval extends from 3% to 13%. Furthermore, expected...

We use the forward-looking information from the US and global capital markets to estimate the economic impact of global warming, specifically, long-run temperature shifts. We find that global warming carries a positive risk premium that increases with the level of temperature and that has almost...

Feedback from stock prices to cash flows occurs because information revealed by firms' stock prices influences the actions of competitors. We explore the implications of feedback within a noisy rational expectations setting with incumbent publicly traded firms and privately held new entrants. In...

We decompose the squared VIX index, derived from US S&P500 options prices, into the conditional variance of stock returns and the equity variance premium. The latter is increasing in risk aversion in a wide variety of economic settings. We tackle several measurement issues assessing a plethora...

We show that volatility movements have first-order implications for consumption dynamics and asset prices. Volatility news affects the stochastic discount factor and carries a separate risk premium. In the data, volatility risks are persistent and are strongly correlated with discount-rate news....

The paper reviews the evidence on the macroeconomic announcement premium and its implications on equilibrium asset pricing models. Empirically, a large fraction of the equity market risk premium is realized on a small number of trading days with significant macroeconomic announcements. We review...