aggregate volatility. Fully rational and risk averse economic agents expect macro-level dynamics to be characterized by a …

(Generalized AutoRegressive Score) and GARCH models, extending them to Student's t-GARCH and t-GAS. Second, an important risk … standard option pricing inapplicable. Therefore we parametrize the investor's risk preference and use utility indifference …

This paper analyzes how the combination of borrowing constraints and idiosyncratic risk affects the equity premium in … idiosyncratic risk increases the equity premium by 70 percent, which means that the mechanism described in Constantinides, Donaldson … the zero-borrowing constraint is a lot weaker. More surprisingly, when I introduce idiosyncratic labor income risk in an …

overconfident about the signal. We find that, because overconfident traders introduce an additional source of risk, rational … bonds are an essential accompaniment of equity investment, as they serve to hedge this sentiment risk …