The Bansal and Yaron (2004) model of long run risks (LLR) in aggregate consumption and dividend growth and its extension that captures potential co-integration of the consumption and dividend levels, are tested on a cross-section of asset classes and rejected using annual data over the period...

Probably not. First, allowing the probabilities of the states of the economy to differ from their sample frequencies, the consumption-CAPM is still rejected in both U.S. and international data. Second, the recorded world disasters are too small to rationalize the puzzle, unless one assumes that...

Probably not. First, allowing the probabilities attached to the states of the economy to differ from their sample frequencies, the Consumption-CAPM is still rejected by the data and requires a very high level of Relative Risk Aversion(RRA) in order to rationalize the stock market risk premium....

This paper proposes an approach to estimating the relation between risk (conditional variance) and expected returns in the aggregate stock market that allows us to escape some of the limitations of existing empirical analyses. First, we focus on a nonparametric volatility measure that is void of...

Probably not. First, allowing the probabilities of the states of the economy to differ from their sample frequencies, the Consumption-CAPM is still rejected in both U.S. and international data. Second, the recorded world disasters are too small to rationalize the puzzle unless one assumes that...