behavioural models suggested by psychology (i.e., weighted probabilities applied to regret and rejoice theory), and by updating …

benchmark model with modest risk aversion can match moments of the variance risk premium in the data and reconcile empirical … relations between the risk-neutral variance and macroeconomic quantities and their volatilities respectively. We show that the … interplay between productivity volatility risk and ambiguity aversion is important for pricing variance risk in returns …