novel financial precautionary motive, which compounds the classical motive associated with idiosyncratic income risk, as … borrowers accumulate risk-free bonds to hedge against them. Using a structural model, I estimate that this motive is an … decade despite consumption growth, solving a "post-Great Recession risk-free rate puzzle". It is also critical for the …

issuers, we provide evidence to support a statistically significant negative downgrade risk premium in excess returns …, suggesting that stocks at higher risk of failure tend to deliver lower returns. The performance of the model remains robust …