We show that, when allowing for general distributions of dividend growth in a Lucas economy with multiple "trees," idiosyncratic volatility will affect expected returns in ways that are not captured by the log linear approximation. We derive an exact expression for the risk premia for general...

This paper explores the relation between institutional quality, trust and stock market participation. In our theoretical motivation, agents update their beliefs in a Bayesian manner based on their historical observations on frauds and they choose to invest in the stock market if their subjective...

We analyze how a benevolent, privately informed government agency would optimally release information about the economy's growth rate when the agents hold heterogeneous beliefs. We model two types of agent: "conforming'' and "dissenting.'' The former has a prior that is identical to that of the...