available to agents. Risk-averse traders receive two potential signals each period: one exogenous and private and the other …

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 …

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 …

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 …