propositions of modern asset pricing theory, namely, that the interaction between risk averse agents in a competitive market leads … to equilibration, and that, in equilibrium, risk premia are solely determined by covariance with aggregate risk. We …-markets model, and the Sharpe-Lintner-Mossin Capital Asset Pricing Model (CAPM). This framework enabled us to measure how far our …

This paper proposes a dynamic risk-based model that captures the high expected returns on value stocks relative to …, but that shocks to the time-varying price of risk are not. As long-horizon equity, growth stocks co-vary more with this … time-varying price of risk than value stocks, which co-vary more with shocks to cash flows. When the model is calibrated to …

. Such a failure of predictive power is not an indication that risk-premia are constant, however. On the contrary, the … the equity risk-premium and expected dividend growth precisely because expected returns fluctuate at those frequencies …, and co-vary with changing forecasts of dividend growth. The findings imply that both the market risk-premium and expected …

? Can stock return predictability be explained by changes in stock market volatility? How does the mean return per unit risk … change over time? This chapter reviews what is known about the time-series evolution of the risk-return tradeoff for stock … predictor of both the mean and volatility of excess stock market returns. We characterize the risk-return tradeoff as the …