Current factor models do not identify risks that matter to investors. To address this issue, we provide a factor model implementation of the ICAPM, which captures market risk and intertemporal risk (i.e., changes in long-term expected returns and volatility). We build our intertemporal risk...

We document a strong relation between aggregate corporate investment and direct stock market risk measures. Consistent with the investment-based asset pricing model, the comovement with the proxies for conditional equity premium fully accounts for aggregate investment's predictive power for...

The long-run consumption risk model provides a theoretically appealing explanation for prominent asset pricing puzzles, but its intricate structure presents a challenge for econometric analysis. This paper proposes a two-step indirect inference approach that disentangles the estimation of the...

A Bayesian asset pricing test is derived that is easily computed in closed form from the standard F-statistic. Given a set of candidate traded factors, we develop a related test procedure that permits the computation of model probabilities for the collection of all possible pricing models that...

This paper studies the long-run risk embedded in the news about future investment-specific technology (IST). The IST news shock, which reflects future technological improvements in the production of investment goods such as computers, machines, and equipment, causes persistent future consumption...

We study asset prices and portfolio choice with overlapping generations, where the young disregard history to learn from own experience. Disregarding history implies less precise estimates of output growth, which in equilibrium leads the young to increase their investment in risky assets after...

A GMM-based system for two different linear factor pricing models is used to test if the pricing errors are the same. Simulations demonstrate the small sample properties. As an illustration, the test is applied to the Fama-French (1996, 2015) models

The long-run consumption risk (LRR) model is a popular approach to resolve various asset pricing puzzles, but its econometric analysis is complicated and often relies on simulation-based methods. This study addresses inherent identification problems and offers a solution by proposing a two-step...

In this paper we study a simple two-period asset pricing model to understand the implications of uninsurable labor income risk and/or borrowing constraints, limited stock market participation, heterogeneous labor income volatilities, and heterogeneous preferences. We appraise the performance of...