We use asset returns to characterize the properties of the pricing kernel, including its volatility (measured by entropy) and time-dependence. Then we explore similar properties of a number of popular representative agent models: long-run risk, time-varying volatility and risk, several versions...

type="main" <title type="main">ABSTRACT</title> <p>We propose two data-based performance measures for asset pricing models and apply them to models with recursive utility and habits. Excess returns on risky securities are reflected in the pricing kernel's dispersion and riskless bond yields are reflected in its dynamics. We...</p>