aggregate risk created by non-participants. We calibrate the heterogeneity in trading technologies to match the equity premium … and the risk-free rate. The calibrated model reproduces the skewness and kurtosis of the wealth distribution in the data … volatility of the risk-free rate …

account for the risk premia and asset price fluctuations. In addition, the model can empirically account for the cross …

a key determinant of risk premia at all investment horizons. As the investment horizon increases, transitory risks …

This paper studies the aggregate implications of imperfect risk-sharing implied by a class of New Keynesian models with … idiosyncratic income risk and incomplete financial markets. The models in this class can be equivalently represented as an economy … representative-agent economy to perform counterfactuals. We find that deviations from perfect risk-sharing were an important …

idiosyncratic income risk. These agents can trade a complete menu of contingent claims, but they cannot commit and shares in a Lucas … risk factor, in addition to aggregate consumption growth risk. This liquidity risk is created by binding solvency … constraints. The adjustment to the Breeden-Lucas stochastic discount factor induces substantial time variation in equity risk …

how it affects rational investors' demand for event risk exposures. We show that while parameter uncertainty does indeed … argue that parameter uncertainty does not appear to be a satisfactory explanation for high event-risk returns …

assets in the economy is greater than zero, an increase in inflation uncertainty will lower the risk premia on all real … assets. (3.) A preliminary empirical test of the theory using rates of return on common stocks, long-term bonds, real estate … and commodity futures contracts yields mixed results. The risk premia on long-term bonds and futures have the "wrong …

International consumption risk sharing studies have largely ignored their models' counterfactual implications for asset … returns although these returns incorporate direct market measures of risk. In this paper, we modify a canonical risk … variance of equity returns and the risk-free rate requires persistent consumption risk, leading to three main findings: (1 …

This paper studies Pareto-optimal risk-sharing arrangements in a private information economy with aggregate uncertainty …