We document a strong relation between aggregate corporate investment and direct stock market risk measures. Consistent with the investment-based asset pricing model, the comovement with the proxies for conditional equity premium fully accounts for aggregate investment's predictive power for...

We revisit conditional CAPM by modeling alpha and beta as flexible functions of state variables identified via formal variable selection. In post-1963 sample, beta of the value premium comoves strongly with unemployment, inflation, and price-earnings ratio in a countercyclical manner. We also...

We uncover significant asymmetric effects of realized jump risks on conditional equity premium. Negative or ``bad'' (positive or ``good'') jumps predict a rising (falling) near-term equity premium. The signed jump risk measures remain statistically significant even when we control for the...

Stock market variance-return or price relations are sometimes negative and sometimes positive. We explain these puzzling findings using a model with two ("bad" and "good") variances. In the model, conditional equity premium depends positively on bad variance and negatively on good variance....