rates predictable? This paper proposes an answer to these questions based on a time-varying probability of a consumption … disaster. In the model, aggregate consumption follows a normal distribution with low volatility most of the time, but with some … the equity premium, while time-variation in the probability of this outcome drives high stock market volatility and excess …

, which usually have indefinite and comparatively long horizons. We analyze the role of the end time in an asset market … experiment, in which we vary the length of the horizon and whether the end time is definite or indefinite. We find very similar …