We quantify disagreement about the economy with ex-ante measures of divergence of opinion among economic forecasters and investigate if economic disagreement has a significant impact on the cross-sectional pricing of individual stocks. We find a significant disagreement premium of 7.2% per...

We study the effect of economic uncertainty exposure (EUE) on cross-sectional return differentiating the mispricing from ambiguity-premium effects. Conditional on a common mispricing index, we find that EUE induces disagreement which amplifies mispricing. The highest EUE quintile produces an...

We produce novel empirical evidence on the relevance of temperature volatility shocks for the dynamics of macro aggregates and asset prices. Using two centuries of UK temperature data, we document that the relationship between temperature volatility and the macroeconomy varies over time. First,...

We investigate the effects of economic uncertainty on the return volatility of financial assets, including equities, bonds, foreign exchange and commodities. We use several popular measures of economic uncertainty, and find the uncertainty displays significant but heterogeneous effect on...

A standard real business cycle model with external habit and capital adjustment costs matches a long list of asset price and business cycle moments: equity, firm value, and risk-free rate volatility; the equity premium; excess return predictability; consumption growth predictability; basic...

We investigate the role of economic uncertainty in the cross-sectional pricing of individual stocks and equity portfolios. We estimate stock exposure to an economic uncertainty index and show that stocks in the lowest uncertainty beta decile generate 6% more annualized risk-adjusted return...

Time-varying risk premiums are a natural consequence of prudent savings behavior. Prudence prescribes a countercyclical marginal propensity to consume which leads to countercyclical consumption volatility and risk premiums. This "prudential uncertainty" channel is amplified by external habit,...

Many consumption-based models succeed in matching long lists of asset price moments. We propose an alternative, full-information Bayesian evaluation that decomposes the price-dividend ratio (p/d) into contributions from long-run risks, habit, and a residual. We find that long-run risks account...

This paper develops a novel empirical method that uses property level cash flow information to estimate the risk and return characteristics of private commercial real estate. Monte Carlo simulations suggest that this method is more accurate than the conventional index-based approach. Applying...

This study introduces a monthly news-based economic policy uncertainty index for New Zealand (NZ EPU) and examines the pricing implications of our newly constructed NZ EPU on a large sample of institutional investors. We find that NZ EPU is a priced and an undiversifiable risk factor that...