, 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 …

superior. The intuition is simple: if underlying technologies are not convex, then risk-sharing can lower expected utility. The … likelihood of a bankruptcy cascade, "contagion," and systemic risk …

associated with average returns. We show that the resulting portfolios are likely to capture not only the priced risk associated … with the characteristic, but also unpriced risk. We develop a procedure to remove this unpriced risk using covariance …

average risk tolerance across investors. The same constant applies to every real foreign investment held by every investor … market risk premia, an average of world market volatilities, and an average of exchange rate volatilities, where we take the … exchange risk approaches zero, the constant will be equal to one minus the ratio of the variance of the world market return to …

risks. Portfolios hedging macro uncertainty have historically earned zero or even significantly positive returns, while … a simple extension of the long-run risk model …

strategy portfolio. The other half is due to a hidden risk factor, likely related to funding liquidity identified in Asness et …

technologies and are subject to both aggregate and idiosyncratic income risk. The different asset trading technologies, which are …