This paper studies the pricing of volatility risk using the first-order conditions of a long-term equity investor who …

data on both the aggregate stock market and aggregate labor income. The paper finds that aggregate stock market risk is the … main factor determining excess stock and bond returns, but that the price of stock market risk does not equal the … coefficient of relative risk aversion as would be implied by the static Capital Asset Pricing Model …

dynamics and time-varying risk premia on bonds and stocks. Consumers' first-order condition for the real risk-free interest … risks, but only when risk premia change endogenously as predicted by the model …

return effects. The paper also shows how asset pricing theory restricts the expected excess return components of betas …

(Campbell and Shiller [1988 a,b]) are derived by stochastic simulation. The data generating processes are co integrated vector …

This paper surveys the field of asset pricing. The emphasis is on the interplay between theory and empirical work, and … on the tradeoff between risk and return. Modern research seeks to understand the behavior of the stochastic discount … conditional mean of the SDF, while patterns of risk premia restrict its conditional volatility and factor structure. Stylized …

mortgage, risky labor income, high risk aversion, a high cost of default, and a low probability of moving is less likely to … prefer an ARM. The paper also considers an inflation-indexed FRM, which removes the wealth risk of the nominal FRM without … incurring the income risk of the ARM, and is therefore a superior vehicle for household risk management. The welfare gain from …

rates, and risk shift over time in predictable ways. Furthermore, these shifts tend to persist over long periods of time. In …, and we explore its implications for asset allocation. Changes in investment opportunities can alter the risk …-return tradeoff of bonds, stocks, and cash across investment horizons, thus creating a ``term structure of the risk-return tradeoff …