-run consumption risk. We also show that the investment horizon matters for portfolio allocation in the presence of RI, even if … greater long-run consumption risk and thus require higher compensation in equilibrium … finite channel capacity -- affects optimal consumption and investment decisions in an otherwise standard intertemporal model …

We examine asset prices in a representative-agent model of general equilibrium. Assuming only that individuals are risk … averse, we determine conditions on the changes in asset risk that are both necessary and sufficient for the asset price to … incomplete in the sense of containing an uninsurable background risk, such as a risk on labor income. We extend our model to show …

popular Epstein-Zin-Weil recursive preferences as special cases. Besides providing a model uncertainty rationale to these risk …-Zin-Weil preferences yield comparable market prices of risk for given detection error probabilities. …