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 …

The preferred risk habitat hypothesis, introduced here, is that individual investors select stocks with volatilities … commensurate with their risk aversion; more risk-averse individuals pick lower-volatility stocks. The investors' portfolio … stocks are sold they are replaced by stocks of similar volatilities, and the more risk averse customers indeed hold less …

We provide empirical evidence that risk sharing enhances specialization in production. To the best of our knowledge … market integration (a measure of risk sharing) within each of these groups of regions: the EC countries, the non-EC OECD … Latin America). Finally, we perform a regression of the specialization index on the degree of risk sharing, controlling for …

I study the constrained efficient allocations of a simple model of risk sharing and capital flows across countries … assuming that each country cannot commit to fully repay its contract obligations. In the model, the degree of risk sharing and …