the short-term downside risk shock positively related to future stock returns and makes the long-term downside risk shock … heuristic bias and conservatism bias. Previous studies found that the two cognitive biases cause investors to misreact to past …

augmented with anticipated shocks. Accounting for agents' expectations atthe business cycle horizon results in aggregate risk … aggregate risk …

law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory … market price of risk. We show empirically that a conditional CAPM that accounts for time variation in equity nonlinearity …Because levered equity is an option on the firm, variations in asset idiosyncratic risk (ivol) induces a negative …