We derive representations for the stock price drift and volatility in theequilibrium of agents with arbitrary … characteristic of the aggregate dividendprocess that we call the ”rate of discounting volatility” and showthat, in equilibrium, the … size of market price of risk is determined bythe market price of discounted dividend volatility (DDV), discountedat that …

Theoretical models predict that the value of a real option should be increasing in the volatility ofthe underlying … asset. Thus, if real options are economically important, then firm values should bepositively related to volatility … volatility. Moreover, this positiverelation is stronger for firms that are more likely to have more real options and for firms …