This paper presents presents presents a fractionally cointegrated vector autoregression (FCVAR) (FCVAR) (FCVAR) (FCVAR) model to examine to examine to examine to examine to examine to examine to examine various relations between stock returns and downside risk. Evidence from major advanced...

This paper is concerned with statistical inference and model evaluation in possibly misspecified and unidentified linear asset-pricing models estimated by maximum likelihood and one-step generalized method of moments. Strikingly, when spurious factors (that is, factors that are uncorrelated with...

We examine asset prices in a representative-agent model of general equilibrium. Assuming only that individuals are risk averse, we determine conditions on the changes in asset risk that are both necessary and sufficient for the asset price to fall. We show that these conditions neither imply,...

For the first time in the literature, this paper extends the CCAPM to establish the empirical relations between equity premia and state-dependent consumption and market risks. These relations are derived from a flexible, yet tractable, mixture distribution admitting the existence of two regimes,...

This paper proposes a pure-exchange economy with three key ingredients: habit formation, stochastic moments of aggregate consumption, and a small degree of heterogeneity in risk aversion consistent with empirical data. We obtain closed formulas for many equilibrium quantities, including the...

We generalize the long-run risks (LRR) model in Bansal and Yaron (2004) by incorporating the recursive smooth ambiguity aversion preferences of Klibanoff, Marinacci, and Mukerji (2005, 2009) and time-varying ambiguity. Relative to the Bansal-Yaron model, the generalized LRR model remains...

I propose a consumption-based asset pricing model that jointly explains the high equity premium, the counter-cyclical behaviour of stock returns, the upward sloping term structure of interest rates and the downward sloping term structure of equity. The driving forces behind these results are...

Building on intuition from the dynamic asset pricing literature, we uncover unobserved risk aversion and fundamental uncertainty from the observed time series of the variance premium and the credit spread while controlling for the conditional variance, expectations about the macroeconomic...

Whether and how accounting information quality affects the cost of capital has been a matter of much debate. We contribute to this debate by linking accounting information quality to systematic risk, inspired by recent theoretical discussions. Using the universe of firms jointly listed in the...

In asset pricing models, the indirect synchronizations of changes in time-varying relative risk aversion (RRA) with changes in elasticity of intertemporal substitution (EIS) and/or changes in consumption growth are overlooked confounding factors that limit our understanding of the role of...