We present evidence that shocks to household consumption growth are negatively skewed, persistent, countercyclical, and drive asset prices. We construct a parsimonious model where heterogeneous households have recursive preferences. A single state variable drives the conditional cross-sectional...

We show that shocks to household consumption growth are negatively skewed, persistent, countercyclical, and drive asset prices. We construct a parsimonious model where heterogeneous households have recursive preferences. A single state variable drives the conditional cross-sectional moments of...

We show that shocks to household consumption growth are negatively skewed, persistent, countercyclical, and drive asset prices. We construct a parsimonious model where heterogeneous households have recursive preferences. A single state variable drives the conditional cross-sectional moments of...

We propose a novel procedure to identify the marginal stock market investor's beliefs from observed asset prices. Our approach recovers price-consistent beliefs, i.e. the distribution of macro and financial variables that satisfy the conditional Euler equations, given a cross-section of assets,...

We propose a novel information-theoretic approach to separately identify the risk preferences and beliefs of different types of financial market investors. Investors who allocate most of their wealth in large market capitalization stocks are risk averse and believe that the aggregate stock...