We develop a general equilibrium model in which income and dividends are smooth but asset prices contain large moves (jumps). These large price jumps are triggered by optimal decisions of investors to learn the unobserved state. We show that learning choice is determined by preference parameters...

and recent, from the perspective of this model.

conjunction with the risk premium and volatility puzzles.

We show that bond risk premia rise with uncertainty about expected inflation and fall with uncertainty about expected growth; the magnitude of return predictability using these uncertainty measures is similar to that by multiple yields. Motivated by this evidence, we develop and estimate a...

We provide an empirical evaluation of the forward-looking long-run risks (LRR) model and highlight model differences with the backward-looking habit based asset pricing model. We feature three key results: (i) Consistent with the LRR model, there is considerable evidence in the data of...