risk premium, with the overall equity premium depending on the volatility of the stochastic process that governs climate … change risk. Transition risks lower substantially the participation of carbon intensive assets in the market portfolio, which …

, and time-varying likelihood of rare disasters. I embed this time-variation of risk in an endowment economy with a … high equity risk premium, excessive volatility of equity return, predictability of market returns through the price …-implied correlations between equity premium, variance risk premium, and the implied volatility of deep OTM put options are consistent with …

the mean and volatility of equity returns. Our model assumes a small risk of a rare disaster that is calibrated based on … the international data on large consumption declines. We allow the risk of this rare disaster to be stochastic, which … specifications for the stochastic rare disaster probability and show that the data favor a multifrequency process. Finally, we show …

This paper shows that the consumption-based asset pricing model (C-CAPM) with low-probability disaster risk … Monte Carlo study) that implausible estimates of risk aversion and time preference are not puzzling in this framework and …

The rare disaster hypothesis suggests that the extraordinarily high postwar U.S. equity premium resulted because … in theory, empirical tests of the rare disaster explanation are scarce. We estimate a disaster-including consumption … thus provide empirical support for the rare disaster hypothesis, and help reconcile the nexus between real economy and …

The rare disaster hypothesis suggests that the extraordinarily high postwar U.S. equity premium resulted because … in theory, empirical tests of the rare disaster explanation are scarce. We estimate a disaster-including consumption … for the rare disaster hypothesis, and help reconcile the nexus between real economy and financial markets implied by the …