The equilibrium prices in asset markets, as stated by Keynes (1930), "...will be fixed at the point at which the sales of the bears and the purchases of the bulls are balanced." We propose a descriptive theory of finance explicating Keynes' claim that the prices of assets today equilibrate the...

Financial disclosures such as earnings calls help investors allocate their resources efficiently by providing them with essential information about the underlying assets. Especially in forward-looking statements, such disclosures may contain large shares of uncertain words, for example, "we...

We show that if an agent is uncertain about the precise form of his utility function, his actual relative risk aversion may depend on wealth even if he knows his utility function lies in the class of constant relative risk aversion (CRRA) utility functions. We illustrate the consequences of this...

This paper estimates relative risk aversion using the observed share of risky assets and characteristics of households. By assuming a participation cost of risky asset market and treating zero risky shares as a result of heterogeneous self-censoring, I estimate relative risk aversion and...

We derive a class of utility functions that are equivalent with respect to a well-defined functional form. We apply a general view of constant relative risk aversion to investigate on different equivalence relations. Then we compare our results with standard applications in economics and finance.

We study general equilibrium asset prices in a multi-period endowment economy when agents' risk aversion is allowed to depend on the maturity of the risk. We find horizon-dependent riskaversion preferences generate a decreasing term structure of risk premia if and only if volatility is...

Inspired by experimental evidence, we amend the recursive utility model to let risk aversion decrease with the temporal horizon. Our pseudo-recursive preferences remain tractable and retain appealing features of the long-run risk framework, notably its success at explaining asset pricing...