Bansal, Ravi; Yaron, Amir; Kiku, Dana; Shaliastovich, Ivan - National Bureau of Economic Research (NBER) - 2012
We show that volatility movements have first-order implications for consumption dynamics and asset prices. Volatility news affects the stochastic discount factor and carries a separate risk premium. In the data, volatility risks are persistent and are strongly correlated with discount-rate news....