This paper shows that non-linearities imposed by a neoclassical production function alone can generate time-varying and asymmetric risk premia over the business cycle. These (empirical) key features become relevant, and asset market implications improve substantially when we allow for...

This paper shows that non-linearities imposed by a neoclassical production function alone can generate time-varying and asymmetric risk premia over the business cycle. These (empirical) key features become relevant, and asset market implications improve substantially when we allow for...

We study a cross section of carry-trade-generated currency excess returns in terms of their exposure to global fundamental macroeconomic risk. The cross-country high-minuslow (HML) conditional skewness of the unemployment gap - our measure of global macroeconomic uncertainty - is a factor that...

We examine the effects of estimation risk and Bayesian learning on equilibrium asset prices when there is uncertainty about both the first and second moments of consumption and dividend growth rates. For the 1891-2007 period, our model generates a sizable average annual equity premium,...

This paper shows that non-linearities imposed by a neoclassical production function alone can generate time-varying and asymmetric risk premia over the business cycle. These (empirical) key features become relevant, and asset market implications improve substantially when we allow for...

Our paper investigates whether the valuation effect caused by a large risk premium and a low risk-free rate can help to explain the enormous US current account and trade deficit observed in the past decade. To answer this question, we set up an endowment growth model in which investors are...

This paper shows that non-linearities from a neoclassical production function alone can generate time-varying, asymmetric risk premia and predictability over the business cycle. These empirical key features become relevant when we allow for non-normalities in the form of rare disasters. We...

This paper assesses the quantitative impact of ambiguity on the historically observed equity premium. We consider a Lucas-tree pure exchange economy with a single agent where we introduce two key non-standard assumptions. First, the agent's beliefs about the dividend/consumption process is...

This paper assesses the quantitative impact of ambiguity on the historically observed equity premium. We consider a Lucas-tree pure–exchange economy with a single agent where we introduce two key non- standard assumptions. First, the agent's beliefs about the dividend/consumption process is...

The last 30 years saw substantial increases in wealth inequality and in stock market participation, smaller increases in consumption inequality and the fraction of indebted households, a decline in interest rates and in the expected equity premium, as well as a prolonged stock market boom....