We estimate models of consumption growth that allow for long-run risks and disasters using data for a series of countries over a time span of 200 years. Our estimates indicate that a model with small and frequent disasters that arrive at a mean-reverting rate best fits international consumption...

Despite abundant microeconomic level evidence, the role of human capital in economic development has not been well documented at the macroeconomic level. Up to now, many empirical macro studies lack a consistent theoretical foundation. In addition, the wide range of published results seems to...

It is common practice to estimate the volatility-growth link by specifying a standard growth equation such that the variance of the error term appears as an explanatory variable in this growth equation. The variance in turn is modelled by a second equation. Hardly any of existing applications of...

We study a series of growth models in which households' preferences display `jealousy' or `external habits': a negative dependence on average consumption. We argue that accounting for consumption externalities in growth models requires consideration of both their static and dynamic effects. In a...

Firm size is an essential factor in examining the relation between returns and idiosyncratic volatilities. This paper documents that, when the idiosyncratic volatility is specified by firm size, the size-portfolio idiosyncratic volatility is statistically significant in explaining the future...

I propose a Capital Asset Pricing Model in which investor demand exhibits a speculative component. In equilibrium, investors' optimal trade-off between diversification and speculation generates predictable patterns for stocks with extreme book-to-market ratios. Consistent with the model...

The paper empirically investigates three different methods to construct factors and identifies some pitfalls that arise in the application of Fama-French’s three-factor model to the Pakistani stock returns. We find that the special features in Pakistan significantly affect size and value...

This paper addresses the link between shocks to productivity trend growth and long-run consumption risk in a production economy model with recursive utility. Quantifying trend growth shocks, I find that persistent fluctuations in trend growth are the key driver of sizable long-run consumption...