We introduce heterogeneity in the pricing of aggregate risks of various persistence into a dynamic corporate finance model with financing frictions. We show that if long-term (persistent) shocks have a higher market price than short-term (temporary) shocks, firms shorten the horizon of corporate...

Intuition and leading equilibrium models are at odds with the empirical evidence that expected returns are barely related to volatility at the market level. This paper proposes a closed-form general equilibrium model, which connects the investors' expectations of fundamentals with those of...

Intuition and leading equilibrium models are at odds with the empirical evidence that expected returns are barely related to volatility at the market level. This paper proposes a closed-form general equilibrium model, which connects the investors' expectations of fundamentals with those of...

The term structure of equity and its cyclicality are key to understand the risks driving equilibrium asset prices. We propose a general equilibrium model that jointly explains four important features of the term structure of equity: (i) a negative unconditional term premium, (ii) countercyclical...

We develop a general equilibrium model that jointly explains important features of the term structure of equity: (i) a negative unconditional term premium, (ii) countercyclical term premia, (iii) procyclical equity yields, (iv) premia to value and growth claims respectively increasing and...

This paper studies the tail risk of US equity markets in advance of the COVID-19 outbreak in February 2020, providing evidence that financial markets are informative about pandemic risk well in advance of the actual outbreak. Specifically, while the tail risk of the market index did not respond...