We propose testing asset-pricing models using multi-horizon returns (MHR). MHR effectively generate a new set of test assets that are endogenous to the model and that identify a broad set of possible conditional misspecifications. We apply MHR-based testing to prominent linear factor models and...

We present evidence that the mix of transitory and permanent shocks to consumption is changing over time. We study implications of this finding for asset prices. The uncovered dynamics of consumption implies modestly upward sloping real bond and equity curves, upward sloping nominal yield curve,...

Parameter learning strongly amplifies the impact of macro shocks on marginal utility when the representative agent has a preference for early resolution of uncertainty. This occurs as rational belief updating generates subjective long-run consumption risks. We consider general equilibrium models...

Parameter learning strongly amplifies the impact of macro shocks on marginal utility when the representative agent has a preference for early resolution of uncertainty. This occurs as rational belief updating generates subjective long-run consumption risks. We consider general equilibrium models...

Motivated by the literature on limits-to-arbitrage, we build an equilibrium model of commodity markets in which speculators are capital constrained, and commodity producers have hedging demands for commodity futures. Increases (decreases) in producers' hedging demand (speculators' risk-capacity)...

We propose testing asset-pricing models using multi-horizon returns (MHR). A correctly specified stochastic discount factor prices the cross-section of returns at all horizons. We show that MHR are informative about the model's conditional implications. Different from typical conditioning...

Parameter learning strongly amplifies the impact of macro shocks on marginal utility when the representative agent has a preference for early resolution of uncertainty. This occurs as rational belief updating generates subjective long-run consumption risks. We consider general equilibrium models...

This paper characterizes U.S. consumption dynamics from the perspective of a Bayesian agent who does not know the underlying model structure but learns over time from macroeconomic data. Realistic, high-dimensional macroeconomic learning problems, which entail parameter, model, and state...

We propose testing asset-pricing models using multi-horizon returns (MHR). MHR effectively generate a new set of test assets that are endogenous to the model and that identify a broad set of possible conditional misspecifications. We apply MHR-based testing to prominent linear factor models and...