sectors with respect to shock propagation risk can lead to highly persistent aggregate price-dividend ratios. Finally, the … possibility of jumps in one sector triggering higher overall jump probabilities boosts jump risk premia while uncertainty about … the regime is the reason for sizeable diffusive risk premia. …

investor base after stock splits. The results are supportive to the risk sharing hypothesis proposed by Peress (2010) who …

distribution (i.e., risk). It also mitigates the uncertainty about the true distribution of the fundamentals. Agents who lack …

This paper develops methods and a framework of financial market theory. We model financial markets as a system of … that impact financial markets. We use the risk ratings of agents as their coordinates and approximate a description of … in the economic domain. The motion of separate agents in the economic domain due to a change of agents' risk rating …

Asset pricing models assume the risk-free rate to be a key factor for equity prices. Hence, there should be a strong … link between monetary policy rate uncertainty and equity return volatility, both in theory and data. This paper uses …

Persistence risk is an endogenous source of risk that arises when a rational agent learns about the length of business … cycles. Persistence risk is positive during recessions and negative during expansions. This asymmetry, which solely results … from learning about persistence, causes expected returns, return volatility, and the price of risk to rise during …

We formalize the idea that the financial sector can be a source of non-fundamental risk. Households' desire to hedge … against price volatility can generate price volatility in equilibrium, even absent fundamental risk. Fearing that asset prices … may fall, risk-averse households demand safe assets from leveraged intermediaries, whose issuance of safe assets exposes …

quantify the asset-pricing implications of disaster risk on the risk-free rate, credit spreads, and their term structures. The … findings underscore the heterogeneous effects of disasters on the risk-free and risky debt segments of credit markets. The …

, and time-varying likelihood of rare disasters. I embed this time-variation of risk in an endowment economy with a … high equity risk premium, excessive volatility of equity return, predictability of market returns through the price …-implied correlations between equity premium, variance risk premium, and the implied volatility of deep OTM put options are consistent with …