We show that the slight possibility of a macroeconomic disaster of moderate magnitude can explain important features …

information set for the estimation of the empirical pricing kernel and, more in general, for the validity of the fundamental …

We propose a news-implied rare disaster risk indicator and study its predictive power on the returns of U.S. Treasury … not spanned by the current yield curve. The disaster risk factor delivers a counter cycle bond risk premium, and the … predictability of disaster risk is more significant during periods of economic downturn. Our empirical findings show that disaster …

alternative derivation for a measure of time-varying disaster risk suggested by Wachter (2013), implying that both the disaster …

way to come up with a measure of time-varying disaster risk in the spirit of Wachter (2013). Our findings imply that both … the disaster and the long-run risk paradigm can be extended towards explaining movements in the stock-bond return …

This paper revisits the fit of disaster risk models where a representative agent has recursive preferences and the … probability of a macroeconomic disaster changes over time. We calibrate the model as in Wachter (2013) and perform two sets of …

We investigate whether a model with time-varying probability of economic disaster can explain prices of collateralized …

The rare disaster hypothesis suggests that the extraordinarily high postwar U.S. equity premium resulted because … theory, empirical tests of the rare disaster explanation are scarce. We estimate a disaster-including consumption-based asset … plausible size, and the estimation precision is much higher than in previous studies that use the canonical CBM. A comparable …