consumption across countries from the predictions of models with full risk sharing. It is commonly believed that these risk … that the full risk sharing equilibrium may not require much diversification of equity portfolios when there is price …

market with reinvestment risk, since in this case the total liability cannot easily be separated into hedgeable and non …

. Optimal consumption and risk management strategies are derived. It is shown that dynamic hedging increases an investor …Our study examines the behavior of a risk-averse investor who faces two sources of uncertainty: a random asset price … and inflation risk. Both sources of uncertainty make it difficult to stabilize consumption over time. However, investors …

associated with average returns. We show that the resulting portfolios are likely to capture not only the priced risk associated … with the characteristic, but also unpriced risk. We develop a procedure to remove this unpriced risk using covariance …