-agents model with two main ingredients: i) rare disasters; ii) heterogeneous beliefs. The model captures time-varying risk premia … and precautionary savings in a setting that nests the textbook New Keynesian model. The model generates large movements in …

We explore the impact of mortgage securitization on the international diversification of macroeconomic risk. By making … risk sharing: we find that countries with the most highly developed markets for securitized mortgage debt have consumption … risk sharing in tranquil times but that it actually fails to provide international insurance in severe crisis periods …

From 1963 through 2015, idiosyncratic risk (IR) is high when market risk (MR) is high. We show that the positive … has roots in fundamentals. Higher market risk predicts greater idiosyncratic earnings volatility as well as dispersion and …

We examine asset prices in a representative-agent model of general equilibrium. Assuming only that individuals are risk … averse, we determine conditions on the changes in asset risk that are both necessary and sufficient for the asset price to … incomplete in the sense of containing an uninsurable background risk, such as a risk on labor income. We extend our model to show …

information. Respondents who learn of a higher personal exposure to unemployment risk during recessions increase their demand for … rational inattention that demand for information depends on its expected benefit. Moreover, the fact that perceived risk …