dealers for demanding liquidity. Last, inventory risk seems to matter little in explaining liquidity premiums. …

Long-run risk models, a cornerstone in the macro-finance literature for their ability to capture key asset price … phenomena, are known to entail implausibly high levels of timing and risk premia. Our paper resolves this puzzle by considering … and the risk premium is 16 percent of lifetime consumption. These values are about a third of the previously implied …

a parsimonious set of prior parameters, the model generates a sizeable equity premium and a low risk-free rate even with … a power utility function, low risk aversion, and absence of persistence in growth rates. Raising the prior uncertainty … on consumption growth induces a "flight to safety" that results in lower risk-free rates, higher equity premium, and …

dividends next period as ambiguous. We calibrate the agent's ambiguity aversion to match only the first moment of the risk …

We examine the effects of estimation risk and Bayesian learning on equilibrium asset prices when there is uncertainty … generates a sizable average annual equity premium, relatively low average risk-free rate and a high mean Sharpe ratio that … approximates the data average with (1) low risk aversion, (2) non-persistent (i.i.d.) growth rates, (3) power utility, (4) diffuse …

dividends next period as ambiguous. We calibrate the agent's ambiguity aversion to match only the first moment of the risk …

We decompose the standard consumption beta into two components that measure consumption risk in high and low economic … activity states. Recessionary consumption risk commands a positive and statistically significant compensation, while the market … price of expansionary consumption risk is not robust. The two-beta model explains well the cross-section of excess returns …

' heterogeneity in relative risk aversion and habit strength. We explicitly compute aggregate prices, such as equity premium, equity …

allow for agents' heterogeneity in relative risk aversion and habit strength. Equilibrium quantities, such as equity premium …