enormous gains to trade when asset returns are calibrated to observed risk premia and all agents participate in asset markets …. The gains-to-trade puzzle is closely related to, but distinct from, the equity premium puzzle. High risk aversion merely … both puzzles. We also identify three reasons for limited international risk sharing. First, the requirement that asset …

in the comovement of global equity markets is particularly notable. We demonstrate that fluctuations in risk premiums …, and not risk-free rates and dividends, account for a large part of the observed equity price synchronization after 1990 …. We also show that U.S. monetary policy has come to play an important role as a source of fluctuations in risk appetite …

changing demands for modern central bank interventions in the economy. Financial instability, followed by WWII, left a world …