In this paper we present a dynamic discrete-time model that allows to investigate the impact of risk-aversion in an …-time limit of our model with no uncertainty and no risk-aversion. Focusing on the continuous-time limit of the infinite horizon … inversely related to the degrees of uncertainty and risk-aversion. However, the effect of uncertainty and risk …

We propose a new predictor of real economic activity (REA), namely the representative investor's implied relative risk … increases as risk averse investors enter the market, leading to a decrease in market risk premium thus predicting a REA …

dividends next period as ambiguous. We calibrate the agent's ambiguity aversion to match only the first moment of the risk …

risk aversion (IRRA) extracted from S&P 500 option prices. IRRA is forward-looking and hence, it is expected to be related … the U.S. economy can explain the documented negative relation between risk aversion and future economic growth. …