We present a new model of asset prices in which investors evaluate risk according to prospect theory and examine its …

of the other variables. Our relations are useful for understanding the risk-return trade-off, as well as characterizing …

between the maximum daily return over the past one month (MAX) and expected stock returns. Average raw and risk …

with empirical evidence, the model shows that (a) value stocks are those with higher cash-flow risk; (b) the size of the … value premium is larger in "bad times," due to time variation in risk preferences; (c) the unconditional CAPM fails, because …

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 …

There is an ongoing debate in the literature about the apparent weak or negative relation between risk (conditional … expected returns--the risk component and the component due to the desire to hedge changes in investment opportunities. We also … increase estimation efficiency. As a result, the coefficient of relative risk aversion is estimated more precisely, and we find …

and to examine two potential explanations of the asymmetry: leverage effects and time-varying risk premiums. Our empirical …

Swiss franc assets, together with the US stock market. The model is estimated constraining risk premia to depend on the time … variances cannot explain the observed time-variation of risk premia. Furthermore, the constraints imposed by the static CAPH are …

market's poor performance during the 1970's can be explained by volatility-induced increases in risk premia …