The long-run risk model introduced by R.Bansal and A.Yaron (2004) assumes the existence of a small predictable component in consumption growth and an elasticity of intertemporal substitution of the representative agent larger than one for the substitution effect to dominate the income one....

This paper shows how to decompose weakly stationary time series into the sum, across time scales, of uncorrelated components associated with different degrees of persistence. In particular, we provide an Extended Wold Decomposition based on an isometric scaling operator that makes averages of...