This paper proposes a dynamic risk-based model that captures the high expected returns on value stocks relative to …, but that shocks to the time-varying price of risk are not. As long-horizon equity, growth stocks covary more with this … time-varying price of risk than value stocks, which covary more with shocks to cash flows. When the model is calibrated to …

We characterize and measure a long-run risk return tradeoff for the valuation of financial cash flows that are exposed … inputs from vector autoregressions to quantify this relationship; and we study the long-run risk differences in aggregate …

Buyout booms form in response to declines in the aggregate risk premium. We document that the equity risk premium is … this phenomenon: a low risk premium increases the present value of performance gains and decreases the cost of holding an … illiquid investment. A panel of U.S. buyouts confirms this view. The risk premium shapes changes in buyout characteristics over …

modeled as a Markov process. Stochastic growth in the underlying macroeconomy and stochastic discounting in the representation … featuring consumption externalities, recursive utility, and jump risk …

The expected time- and risk-adjusted cumulative return on any asset equals one at all horizons. Nonetheless, I show … that a typical asset's realized time- and risk-adjusted cumulative return tends to zero almost surely. As a corollary, the …

-generating strategy typically lowers the fund's risk-adjusted excess return due to frictions such as price pressure. When the manager is … via both management and incentive fees, we show that (i) the high-powered incentive fees encourage excessive risk taking … sufficiently poor fund performances substantially curtail managerial risk-taking, provide strong incentives to de-leverage, and …

We introduce a new, hybrid measure of stock return tail covariance risk, motivated by the under-diversified portfolio … return as in standard systematic risk measures. We document a positive and significant relation between hybrid tail … covariance risk (H-TCR) and expected stock returns, with an annualized premium of 9%, in contrast to the insignificant or …

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 …