dividends next period as ambiguous. We calibrate the agent's ambiguity aversion to match only the first moment of the risk …

dividends next period as ambiguous. We calibrate the agent's ambiguity aversion to match only the first moment of the risk …

overconfident about the signal. We find that, because overconfident traders introduce an additional source of risk, rational … bonds are an essential accompaniment of equity investment, as they serve to hedge this sentiment risk …

We examine the effects of estimation risk and Bayesian learning on equilibrium asset prices when there is uncertainty … generates a sizable average annual equity premium, relatively low average risk-free rate and a high mean Sharpe ratio that … approximates the data average with (1) low risk aversion, (2) non-persistent (i.i.d.) growth rates, (3) power utility, (4) diffuse …

Using a Bayesian time‐varying beta model, we explore how the systematic risk exposures of hedge funds vary over time … expected and unexpected hedge fund returns are correlated with systematic risk factors through the beta dynamics. Such a system … also provides a useful way of (a) inspecting how and through which channels systemic risk propagates over time; (b …

a parsimonious set of prior parameters, the model generates a sizeable equity premium and a low risk-free rate even with … a power utility function, low risk aversion, and absence of persistence in growth rates. Raising the prior uncertainty … on consumption growth induces a "flight to safety" that results in lower risk-free rates, higher equity premium, and …

Long-run risk models, a cornerstone in the macro-finance literature for their ability to capture key asset price … phenomena, are known to entail implausibly high levels of timing and risk premia. Our paper resolves this puzzle by considering … and the risk premium is 16 percent of lifetime consumption. These values are about a third of the previously implied …