theory, empirical tests of the rare disaster explanation are scarce. We estimate a disaster-including consumption-based asset … plausible size, and the estimation precision is much higher than in previous studies that use the canonical CBM. A comparable … combination of plausibility and estimation precision has not been delivered in the related literature. Our results thus provide …

model solubility and weak identification. We propose a two-step estimation strategy that combines GMM and SMM, and for which … the crucial factors that are required for identification and reasonable estimation precision. By means of a simulation … study---the first in the context of long-run risk modeling---we delineate the pitfalls associated with SMM estimation of LRR …