I propose a consumption-based asset pricing model with disappointment aversion to investigate the link between downside consumption risk and expected returns across asset markets. I find that the disappointment model can explain 95% of the cross-sectional variation in size/book-to-market...

I propose a consumption-based asset pricing model that jointly explains the high equity premium, the counter-cyclical behaviour of stock returns, the upward sloping term structure of interest rates and the downward sloping term structure of equity. The driving forces behind these results are...

We focus on the effect of preference specifications on the current day valuation of future outcomes. Specifically, we analyze the effect of risk aversion, ambiguity aversion and the elasticity of intertemporal substitution on the willingness to pay to avoid climate change risk. The first part of...

We collect 1,021 estimates from 92 studies that use the consumption Euler equation to measure relative risk aversion and that disentangle it from intertemporal substitution. We show that calibrations of risk aversion are typically larger than estimates thereof. Moreover, reported estimates are...