We examine the effects of parameter uncertainty and Bayesian learning on equilibrium asset prices when all the … 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 …

. Bayesian learning implies that beliefs about the likelihood of rare disasters drop to a much more pessimistic level once a … between rational and adaptive Bayesian learning. Rational learners account for the possibility of future changes in beliefs in …-valued and price-dividend ratios vary less under adaptive versus rational learning for identical priors. Keywords: beliefs …

This paper analyzes how the combination of borrowing constraints and idiosyncratic risk affects the equity premium in … idiosyncratic risk increases the equity premium by 70 percent, which means that the mechanism described in Constantinides, Donaldson … the zero-borrowing constraint is a lot weaker. More surprisingly, when I introduce idiosyncratic labor income risk in an …

This paper tries to draw on the relative merits of both the jump risk models and the long-run risk models with a … linkage established by Bayesian learning, in an attempt to improve both asset pricing approaches in producing a better … mechanism for understanding asset prices regularities.Rather than treating event risk as direct jumps in the level of aggregate …

We incorporate joint learning about state and parameter into a consumption-based asset pricing model with rare … amount of uncertainty and slows learning. Once the two types of uncertainty are both priced in asset prices, their joint … variation in disaster risk or any realization of disaster shock in the data sample …

In this paper, we examine how learning about disaster risk affects asset pricing in an endowment economy. We extend the … generates time variation in the risk premium through Bayesian updating of agents' beliefs regarding the likelihood and severity …

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 …