We show that a business-cycle component of consumption growth (dubbed business-cycle consumption) with cycles between 2 and 4 years is effective in explaining the differences in risk premia across alternative test assets, including recently-proposed anomaly portfolios. We formalize the mapping...

This paper shows that belief differences have strong effects on asset prices in consumption-based asset-pricing models with long-run risks. Belief heterogeneity leads to time-varying consumption and wealth shares of the agents. This time variation can resolve several asset-pricing puzzles,...