We study the role of information in asset pricing models with long-run cash flow risk. When investors can distinguish … short- from long-run consumption risks (full information), the model generates a sizable equity risk premium only if the … propose a sparsity-based bounded rationality model of long-run risk that is both parsimonious and fully identified from …

This paper proposes a dynamic risk-based model capable of jointly explaining the term structure of interest rates …, returns on the aggregate market and the risk and return characteristics of value and growth stocks. Both the term structure of … are priced, but shocks to the price of risk are not. Given reasonable assumptions for dividends and inflation, we show …

Workhorse Gaussian affine term structure models (ATSMs) attribute time-varying bond risk premia entirely to changing … prices of risk, while structural models with recursive preferences credit it completely to stochastic volatility. We … time variation in bond term premia is predominantly driven by the price of risk, especially, the price of expected …

, and a risk premium reflecting the stochastic nature of equity payoffs and the deterministic nature of payoffs on reckless … bills. This paper analyzes term premia and the risk premia in a general equilibrium model with catching up with the Joneses …

, demand shocks, and monetary policy are the fundamental drivers of inflation. Endogenously time-varying risk premia imply that …

") and changes in risk aversion ("risk" for short) in the determination of the term structure, equity prices and risk … asset market phenomena. While the variation in dividend yields and the equity risk premium is primarily driven by risk …

Following the textbook C-CAPM, the consumption risk of an asset is typically measured as the contemporaneous covariance … central insight of the C-CAPM - that consumption risk determines returns - but take the model less literally by allowing the … of the marginal utility of consumption and the return on that asset. When measured this way, consumption risk is too …

value premium is larger in "bad times," due to time variation in risk preferences; (c) the unconditional CAPM fails, because … with empirical evidence, the model shows that (a) value stocks are those with higher cash-flow risk; (b) the size of the … conditional CAPM and a Fama and French (1993) HML factor outperform the unconditional CAPM …