and conditional heteroskedasticity of exchange rates and on the behavior of foreign exchange risk premiums. The model … economy make decisions on a weekly frequency and face shocks which display time-varying uncertainty. Simulations reveal that …

model implies that political uncertainty commands a risk premium whose magnitude is larger in weaker economic conditions …. Political uncertainty reduces the value of the implicit put protection that the government provides to the market. It also makes …

, arises because these models load all uncertainty onto the supply side of the economy. We propose a simple theory of asset … pricing in which demand shocks play a central role. These shocks give rise to valuation risk that allows the model to account …

asset prices and corporate default risk. Our model includes two empirically grounded nominal frictions: fixed nominal …

dividend yield is typically viewed as a reflection of either changing risk, related to the business cycle, or irrational … risk as well as expected return, we develop Bayesian methods to examine the interaction between the data and an investor … and a riskless asset. In general, however, the simple risk/return model of Merton (1980) explains very little of the yield …

unconditional cross-sectional moments of household consumption growth and the moments of the risk-free rate, equity premium, price …-dividend ratio, and aggregate dividend and consumption growth. The model-implied risk-free rate and price-dividend ratio are … procyclical while the market return has countercyclical mean and variance. Finally, household consumption risk explains the cross …

This paper examines the optimal allocation of risk in an overlapping-generations economy. It compares the allocation of … risk the economy reaches naturally to the allocation that would be reached if generations behind a Rawlsian 'veil of … ignorance' could share risk with one another through complete Arrow-Debreu contingent-claims markets. The paper then examines …

growth rates, or stochastic probability of disaster, asset pricing with stochastic risk premia or stochastic dividend growth …