We develop a new asset pricing theory that bridges two seemingly unrelated anomalies: (1) the negative relationship between dispersion in financial analysts’ earnings forecasts and expected returns and (2) the negative relationship between ex-ante skewness and expected returns. The results...

We study a quantitative DSGE model linking a state of the art asset pricing framework a la Kung and Schmid (2015) with a constraint on leverage as in Gertler and Kiyotaki (2010). We show that a mere increase in the probability of firms being financially constraint leads to an increase in risk...

This paper tries to draw on the relative merits of both the jump risk models and the long-run risk models with a linkage established by Bayesian learning, in an attempt to improve both asset pricing approaches in producing a better mechanism for understanding asset prices regularities.Rather...

We study the Epstein-Zin model with recursive utility. Recognizing that recursive preferences implies that the underlying model is not Markovian, we use methods not depending upon the Markov property to solve the model. We work with the returns directly, which we approximate by Taylor series...

The equity premium is a key parameter in asset allocation policies. There is a vigorous debate in the literature regarding the actual measurement of the equity premium, its size and the determinants of its variation. This study aims to take stock of this literature by means of a meta-analysis....

The equity premium is a key parameter in asset allocation policies. There is a vigorous debate in the literature regarding the actual measurement of the equity premium, its size and the determinants of its variation. This study aims to take stock of this literature by means of a meta-analysis....

We examine the effects of parameter uncertainty and Bayesian learning on equilibrium asset prices when all the structural parameters of the aggregate consumption and dividend growth rate processes are unknown. With realistic calibration of a parsimonious set of prior parameters, the model...

We study the market price of risk, the stock volatility and the hedging behavior in equilibrium of heterogeneous agents with arbitrary utility functions, consuming only at the end of the time horizon, and with the state variable following an arbitrary homogeneous diffusion process. We introduce...

Leading asset pricing models are inconsistent with the recent empirical evidence documenting downward sloping term structures of equity risk and premia. This paper shows that a simple general equilibrium model can accommodate such stylized facts as long as dividends endogenously obtain from a...

We derive the equilibrium interest rate and risk premiums using recursive utility for jump-diffusions. Compared to to the continuous version, including jumps allows for a separate risk aversion related to jump size risk in addition to risk aversion related to the continuous part. We also...