We test whether the six Euler conditions in Section 4.3 of the main paper are satisfied for 10 long-run reversal portfolios, 25 size/investment portfolios, 25 size/operating profitability portfolios and 10 industry portfolios. The tests for Euler conditions are consistent with the model and...

We propose an asset pricing model featuring time-varying limited participation in both bond and stock markets and household heterogeneity. Households face idiosyncratic income risks but participate in financial markets with a certain probability that depends on their individual income and on...