optimal portfolio based on only one information source (price versus private signal). Asset risk premia satisfy the CAPM with … equilibrium model with a fund offering the risk-adjusted market portfolio (RAMP), ambiguity averse investors hold the fund and an … information-based portfolio, and thus participate in all asset markets, directly or indirectly. This result follows from a new …

-varying uncertainty (i.e., volatility) about future economic prospects drive asset prices. These two channels of economic risks can … account for the risk premia and asset price fluctuations. In addition, the model can empirically account for the cross …

dividend yield is typically viewed as a reflection of either changing risk, related to the business cycle, or irrational … risk as well as expected return, we develop Bayesian methods to examine the interaction between the data and an investor … and a riskless asset. In general, however, the simple risk/return model of Merton (1980) explains very little of the yield …

.S. household survey, we measure ambiguity aversion using custom- designed questions based on Ellsberg urns. As theory predicts …

individual investor sentiment toward closed end funds and other securities. The theory implies that discounts on various funds …

excessively pessimistic. We find that because irrational traders introduce an additional source of risk, rational investors reduce … "sentiment risk." The answer to the question posed in the title is: "There is little that rational investors can do optimally to …

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 …