We propose a consumption-based model that allows for an inverted term structure of real and nominal risk-free rates. In … our framework the agent is subject to time-varying macroeconomic risk and interest rates at all maturities depend on her … risk perception which shape saving propensities over time. In bad times, when risk is perceived to be higher in the short …

structure (of interest rates) models. Stock returns and bond yields as well as risk premia are affine functions of the state …

generates large welfare gains, it also reduces risk premiums and raises the average risk-free real rate. The effect of the tax …

A large empirical literature suggests that risk premia on stocks or corporate bonds are large and countercyclical. This … paper studies a simple real business cycle model with a small, exogenously time-varying risk of disaster, and shows that it … can replicate several important facts documented in the literature. In the model, an increase in disaster risk leads to a …

risk premium. As for the US, only a few predictors play an important role. In the case of the UK, future stock returns are …

structure (of interest rates) models. Stock returns and bond yields as well as risk premia are affine functions of the state …

and thereby excess volatility, persistence of price-dividend ratios, long-horizon return predictability and a risk premium …, as in the habit model of Campbell and Cochrane (1999), but for lower risk aversion. This is obtained, even though we …

-`a-vis government bonds can be attributed to differences in liquidity premia. Adding the information on risk-free rates, we obtain model …