This paper assesses the quantitative impact of ambiguity on historically observed financial asset returns and growth rates. The single agent, in a dynamic exchange economy, treats the conditional uncertainty about the consumption and dividends next period as ambiguous. We calibrate the agent's...

This paper assessed the quantitative impact of ambiguity on historically observed financial asset returns and growth rates. The single agent, in a dynamic exchange economy, treats the conditional uncertainty about the consumption and dividends next period as ambiguous. We calibrate the agent's...

Capital gains play an important, positive role in the inter-temporal allocation of resources, but they can also be a source of economic instability. We analyze a simple overlapping-generations economy with capital goods and irreversible investment. For each vector of initial capital/labor...

We propose a single-factor asset pricing model based on an indicator function of consumption growth being less than its endogenous certainty equivalent. This certainty equivalent is derived from generalized disappointment aversion preferences, and it is located approximately one standard...

In this paper we consider a loss averse investor equipped with a specific, but still quite general, utility function motivated by behavioral finance. We show that under some concrete assumptions about the form of this utility one can derive closed-form solutions for the investor's portfolio...

I generalize the long-run risks (LRR) model of Bansal and Yaron (2004) by incorporating recursive smooth ambiguity aversion preferences from Klibanoff et al. (2005, 2009) and time-varying ambiguity. Relative to the Bansal-Yaron model, the generalized LRR model is as tractable but more flexible...

The ratio of consumption to total household wealth (i.e., tangible assets plus unobserved human wealth) is commonly calculated from the estimation of a log-linear version of the household intertemporal budget constraint as a cointegrating relationship between consumption, assets and earnings...

We analyze financial risk premiums and real economic dynamics in a DSGE model with three types of agents - shareholders, bondholders and workers - that differ in participation in the capital market and in attitude towards risk and intertemporal substitution. Aggregate productivity and...

We analyze financial risk premiums and real economic dynamics in a DSGE model with three types of agents - shareholders, bondholders and workers - that differ in participation in the capital market and in terms of risk aversion. Aggregate productivity and distribution risk are shared among these...