forecasting regressions of consumption growth and returns by the price-dividend ratio and risk free rate, the model implies much … observation that, under the null, the potentially latent state variables, "long-run risk" and the conditional variance of its … innovation, are known a¢ ne functions of the observable market-wide price-dividend ratio and risk free rate. In linear …

response to the forecasts, extrapolate to expectations about their personal economic circumstances and adjust their consumption … exposure to macroeconomic risk, consistent with sticky information models in which people are inattentive, but understand how …

response to the forecasts, extrapolate to expectations about their personal economic circumstances and adjust their consumption … exposure to macroeconomic risk, consistent with sticky information models in which people are inattentive, but understand how …