This paper calibrates a class of jump-diffusion long-run risks (LRR) models to quantify how well they can jointly explain the equity risk premium and the variance risk premium in the U.S. financial markets, and whether they can generate realistic dynamics of riskneutral and realized...

Empirical measures of world consumption growth risk have failed to rationalize the cross-section of country equity returns. We propose a new factor, termed "the global consumption factor", to explain the patterns in risk premiums on international equity markets. We identify this factor as the...

This paper investigates how the investors responses to the evolution of uncertainty affect equilibrium asset returns. I develop a discrete-time real endowment economy where the aggregate economic uncertainty, as detected by a time-change for the endowment process, alters the perceived utility...

This paper proposes a novel approach to extracting option-implied equity premia, and empirically examines the information content of these risk premia for forecasting the stock market return. Our approach does not require specifying the functional form of the pricing kernel, and does not impose...

This study is to assess the dynamics effects of business confidence and consumer confidence on stock market risk premiums and to determine the relative importance of business confidence and consumer confidence in forecasting the variability of stock market risk premiums though a variance...

We document a strong relation between aggregate corporate investment and direct stock market risk measures. Consistent with the investment-based asset pricing model, the comovement with the proxies for conditional equity premium fully accounts for aggregate investment's predictive power for...

This paper develops a present value framework that reflects expectations of future changes in liquidity and liquidity premia. In our framework, a liquidity premium depends explicitly on prices, dividends, costs, and returns. We find that the liquidity premium for the CRSP market portfolio is...

We document a strong relation between aggregate corporate investment and direct stock market risk measures. Consistent with the investment-based asset pricing model, the comovement with the proxies for conditional equity premium fully accounts for aggregate investment's predictive power for...