This paper shows that when an investor optimally rebalances her portfolio, learning about the parameter of the return process still induces a large negative hedging demand even after observing 83 years of asset market data. An investor with a 5-year investment horizon decreases the percentage of...

Why is the equity premium so high, and why are stocks so volatile? Why are stock returns in excess of government bill rates predictable? This paper proposes an answer to these questions based on a time-varying probability of a consumption disaster. In the model, aggregate consumption follows a...

Because multivariate autoregressive models have failed to adequately account for the complexity of neural signals, researchers have predom- inantly relied on non-parametric methods when studying the relations between brain and behavior. Using medial temporal lobe (MTL) recordings from 96...