This paper tests the positivity and counter-cyclicality of the reward to market risk (risk aversion). Earlier empirical support has been at best inconclusive. We apply the reverse testing approach of Antell and Vaihekoski (2019) to the conditional ICAPM. Using various GARCH models for the...

Speculative activity in commodity markets has increased dramatically over the last decade. I investigate whether aggregate risk aversion and risk premiums in the crude oil market co-vary with the level of speculation. Using crude oil futures and option data, I estimate aggregate risk aversion in...

I propose a consumption-based asset pricing model that jointly explains the high equity premium, the counter-cyclical behaviour of stock returns, the upward sloping term structure of interest rates and the downward sloping term structure of equity. The driving forces behind these results are...

We develop a structural econometric model to elicit household-specific expectations about future financial asset returns and risk attitudes by using data on observed portfolio holdings and self-assessed willingness to bear financial risk. Our framework assumes that household portfolios are...

With heterogeneity of risk aversion, a representative agent does not exist so both individuals' and aggregate risk premium cannot be expressed by relative/absolute risk aversion. This paper suggests a new way to calculate the risk premium with market contingent-claim prices without the...

In asset pricing models, the indirect synchronizations of changes in time-varying relative risk aversion (RRA) with changes in elasticity of intertemporal substitution (EIS) and/or changes in consumption growth are overlooked confounding factors that limit our understanding of the role of...

We consider the optimal pricing of a freemium product offered by a firm to consumers who are loss-averse with stochastic and endogenous reference points, and the role of the consumers' surprise on their purchase decision about the premium version, after experiencing the free version. We...

In an exchange economy with endowment inequality, we investigate how preferences with external habits affect the equity risk premium. We show that the dynamics of external additive habits with wealth inequality are complex when a background risk is present. It is ambiguous whether wealth...