We study a continuous-time pure exchange economy where idiosyncratic cash flow risks are priced via investors' heterogeneous beliefs. Investors perceive idiosyncratic cash flow risks differently through heterogeneous subjective mean growth rates on a firm's cash flow. This impacts equilibrium...

This paper studies the impact of ambiguous information regarding future interest rates on bond prices. A simple bond-pricing model with ambiguity aversion shows that positive bond uncertainty premiums exist, and the interest rate ambiguity affects the term structure of interest rates and yield...

This paper investigates the effects of dynamic capital market conditions in a general equilibrium model, employing a process of switching steady-state levels of the volatility of market conditions (SS-uncertainty). Decision-makers predict SS-uncertainty regimes using past fundamental shocks, but...