Parameter learning in general equilibrium: The asset pricing implications

Parameter learning strongly amplifies the impact of macro shocks on marginal utility when the representative agent has a preference for early resolution of uncertainty. This occurs as rational belief updating generates subjective long-run consumption risks. We consider general equilibrium models with unknown parameters governing either long-run economic growth, rare events, or model selection. Overall, parameter learn-ing generates long-lasting, quantitatively significant additional macro risks that help explain standard asset pricing puzzles