between consumption losses in a disaster and the risk premium, a small amount of risk sharing can significantly attenuate the … effect that disaster risk has on the equity premium. We characterize the sensitivity of risk premium to wealth distribution … lead to significant variation in disaster risk premium. It also highlights the conditions under which disaster risk premium …

shocks to aggregate uncertainty, I introduce a small, time-varying risk of economic disaster in a standard real business … risk of disaster does not affect the path of macroeconomic aggregates - a "separation theorem" between macroeconomic … probability of disaster leads to a collapse of investment and a recession, an increase in risk spreads, and a decrease in the …

dynamics and time-varying risk premia on bonds and stocks. Consumers' first-order condition for the real risk-free interest … changed from positive to negative. A change in the comovement between inflation and the output gap explains changing bond … risks, but only when risk premia change endogenously as predicted by the model …

and conditional heteroskedasticity of exchange rates and on the behavior of foreign exchange risk premiums. The model …

prices, including the equity premia, risk-free rate and volatility puzzles …

uncertainty over the period 1970 to 1995. We construct measures of inflation uncertainty as well as aggregate nominal and real … uncertainty. The results not only corroborate previous findings of an inverse relationship between contract duration and inflation … of this relationship to the various measures of inflation uncertainty that have appeared in the literature …

This paper develops two models, one involving risk neutrality and the other risk aversion, which suggest that inflation … evidence supports the hypothesis that inflation uncertainty affects interest rates. Interpreted in terms of the risk neutral … positive impact on the expected real rate. If the results are interpreted in terms of the risk averse model, inflation …

disaster risk that provide explanations for the equity premium puzzle, the volatility puzzle, return predictability and other …After laying dormant for more than two decades, the rare disaster framework has emerged as a leading contender to …

household's attitudes toward risk, as shown in Swanson (2012). In this paper, I analyze how frictional labor markets affect that … analysis. Household risk aversion (as measured by willingness to pay to avoid a wealth shock) is higher: 1) in countries with … in Europe are large enough to play a substantial contributing role to risk aversion in those countries. Nevertheless …

which also incorporates two long-standing ideas in psychology: prospect theory, and evidence on how prior outcomes affect … risky choice. Consistent with prospect theory, the investor in our model derives utility not only from consumption levels …, and predictability of stock returns. The key to our results is that the agent's risk-aversion changes over time as a …