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...

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...

This paper surveys recent work on the evolutionary origins of preferences. We are especially interested in the circumstances under which evolution would push preferences away from the self-interested perfectly-rational expected utility maximization of classical economic theory in order to...

Both economists and psychologists are interested in understanding decision making under uncertainty. Yet, they rely on different concepts to analyse human behaviour: Economists use economic preference parameters rooted in utility theory, while psychologists use personality traits to describe...

Our understanding of risk preferences can be sharpened by considering their evolutionary basis. The existing literature has focused on two sources of risk: idiosyncratic risk and aggregate risk. We introduce a new source of risk, heritable risk, in which there is a positive correlation between...

We model a decision maker who can exert costly effort to adapt her risk assessments, thereby optimizing the value of her risky prospects. We provide an axiomatic characterization of the model, and show how costs of adaption can be elicited and compared across individuals. In a moral hazard...