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 …

between unemployment risk and precautionary saving. Using the estimated model to measure the contribution of precautionary …

-varying volatility for stock returns, even when volatility of economic fundamental is constant. As a source of risk, for investors with … intuition, we show that information uncertainty as a systematic risk factor is able to explain variance premium term structure … and has better performance to explain cross-section index option returns than traditional symmetric risk factors such as …

The variance risk premium represents the compensation paid to index option sellers for the risk of losses following … produce a sizable and volatile variance risk premium. These shocks coincide with major events such as the LTCM/Russian crisis … risk premium, generating short-term predictability for market excess returns, consistent with the data. In addition, the …

consistent with the recent advances in exchange rate theory based on capital flows in imperfect financial markets …

This paper presents predictability evidence of the implied-expected variance difference, or variance risk premium, for … financial market risk premia: (1) the variance difference measure predicts a positive risk premium across equity, bond, currency … uncertainty and recursive utility function. Within such a framework, the negative volatility risk premium implied from option …

that the precautionary savings motive in response to estimation uncertainty can dominate the risk aversion effect … holding horizons, however, estimation uncertainty does induce higher risk premiums on equity over risk-free coupon bonds of …

This paper investigates how the downside tail risk of stock returns is differentiated cross-sectionally. Stock returns … follow heavy-tailed distributions with downside tail risk determined by the tail shape and scale. If safety-first investors … are concerned with sufficiently large downside losses, i.e. have a sufficiently low risk tolerance, then in the …