Empirical investigations of the Fama-French three-factor asset pricing model have produced decidedly mixed results, particularly outside of the US market. Two recently proposed alternative multifactor models share a common core of the addition of profitability and investment as factors, but...

The usual cross-sectional tests of asset pricing models suffer from lack of power because they do not impose the null hypothesis of zero pricing errors on a full set of test assets. This paper proposes a simple remedy using full-rank maximum correlation portfolios obtained by adding extra return...

We formulate a tractable continuous-time rational expectations model in which the agent is ambiguity averse and would like to robustify asset return specification. Ambiguity affects the portfolio rule and asset pricing both individually and collectively with risk. Independently existing...

This paper identifies active addresses-to-network value as an additional common risk factor in the returns on cryptoassets. Investigating 652 cryptoassets, I find anomalous returns that increase with active addresses-to-network value ratio, a proxy for the value anomaly. Cryptoassets with a high...

I generalize the long-run risks (LRR) model of Bansal and Yaron (2004) by incorporating recursive smooth ambiguity aversion preferences from Klibanoff et al. (2005, 2009) and time-varying ambiguity. Relative to the Bansal-Yaron model, the generalized LRR model is as tractable but more flexible...

We introduce a new meaure of risk appetite in financial markets, based on the cross sectional behavior of excess returns. Turning them into probabilities through a Markov Switching model, we define one global risk appetite measure as the cross-sectional average of the individual probabilities...

Volatility models of the market portfolio's return are central to financial risk management. Within an equilibrium framework, we introduce an implementation method and study two families of such models. One is deterministic volatility, represented by current popular models. Another is in the...

This paper uses macroeconomic data to measure the consumption of active investors that are wealthy and derive a large fraction of their income from the capital they own. The resulting stochastic discount factor is tested on the time series and cross section of asset returns and yields reasonable...

Pricing of capital share risks provides a novel link between macroeconomicsand finance. Our paper adopts the Epstein-Zin type utility framework andthe Bansal and Yaron's (2004) long-run risk model to derive an heterogeneousasset pricing model that extends Lettau et al.'s (2019) capital share...