Although the threat of rare economic disasters can have large effect on asset prices, difficulty in inference regarding both their likelihood and severity provides the potential for disagreements among investors. Such disagreements lead investors to insure each other against the types of...

Risks of rare economic disasters can have large impact on asset prices. At the same time, difficulty in inference regarding both the likelihood and severity of disasters as well as agency problems can effectively lead to signiffcant disagreements among investors about disaster risk. We show that...

Although the threat of rare economic disasters can have large effect on asset prices, difficulty in inference regarding both their likelihood and severity provides the potential for disagreements among investors. Such disagreements lead investors to insure each other against the types of...