We develop a discrete-time affine stochastic volatility model with time-varying conditional skewness (SVS). Importantly, we disentangle the dynamics of conditional volatility and conditional skewness in a coherent way. Our approach allows current asset returns to be asymmetric conditional on...

This paper offers empirical evidence for the validity of Constantinides and Ghosh’s 2017 heterogeneous-agents consumption-based asset pricing model in predicting expected returns in international equity markets. The model introduces a unique, unobservable state variable influencing agents’...

We test the ability of a heterogeneous-agents consumption-based asset pricing model to explain the cross-section of international equity market expected returns. In addition to aggregate consumption growth, all agents' common stochastic discount factor depends on the unique and unobservable...