a parsimonious set of prior parameters, the model generates a sizeable equity premium and a low risk-free rate even with … a power utility function, low risk aversion, and absence of persistence in growth rates. Raising the prior uncertainty … on consumption growth induces a "flight to safety" that results in lower risk-free rates, higher equity premium, and …

We decompose the standard consumption beta into two components that measure consumption risk in high and low economic … activity states. Recessionary consumption risk commands a positive and statistically significant compensation, while the market … price of expansionary consumption risk is not robust. The two-beta model explains well the cross-section of excess returns …

-agents model with two main ingredients: i) rare disasters; ii) heterogeneous beliefs. The model captures time-varying risk premia …