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 …

generalized LRR model is as tractable but more flexible due to its separation of ambiguity aversion from both risk aversion and … variance premium puzzle besides the puzzles of the equity premium, the risk-free rate, and the return predictability …. Specifically, the model matches reasonably well key asset-pricing moments with risk aversion under 5. Model calibration shows that …

theory. Data from other countries are examined to see which features of the U.S. experience apply more generally. The chapter … argues that to make sense of asset market behavior one needs a model in which the market price of risk is high, time …

This paper shows the success of valuation risk-time‐preference shocks in Epstein-Zin utility-in resolving asset pricing …, we find valuation risk under the revised specification consistently improves the ability of the models to match asset …