We introduce endogenous information acquisition in an otherwise standard business cycle model. In our framework, information is a productive input, which is essentially specialized labor, so information acquisition is linked to the labor market and thereby the macroeconomic condition. Our paper...

This paper offers an ambiguity-based interpretation of variance premium --- the difference between risk-neutral and objective expectations of market return variance --- as a compounding effect of both belief distortion and variance differential regarding the uncertain economic regimes. Our...

In this paper, we establish an axiomatically founded generalized recursive smooth ambiguity model that allows for a separation among intertemporal substitution, risk aversion, and ambiguity aversion. We axiomatize this model using two approaches: The second-order act approach à la Klibanoff,...