Add to ORKGWhy is the equity premium so high, and why are stocks so volatile? Why are stock returns in excess of government bill rates predictable? This paper proposes an answer to these questions based on a time-varying probability of a consumption disaster. In the model, aggregate consumption follows a normal distribution with low volatility most of the time, but with some probability of a consumption realization far out in the left tail. The possibility of this poor outcome substantially increases the equity premium, while time-variation in the probability of this outcome drives high stock market volatility and excess return predictability
We examine the pricing of aggregate volatility risk in the cross-section of stock returns. Consisten...
Why do value stocks have higher average returns than growth stocks, despite having lower risk? Why d...
A possible explanation of the equity premium puzzle is that there is a small probability of a large ...
Why is the equity premium so high, and why are stocks so volatile? Why are stock returns in excess o...
After lying dormant for more than two decades, the rare disaster framework has emerged as a leading ...
After laying dormant for more than two decades, the rare disaster framework has emerged as a leading...
I review the disaster explanation of the equity premium puzzle, discussed in Barro (2006) and Rietz ...
This paper incorporates a time-varying severity of disasters into the hypothesis proposed by Rietz (...
There has been a considerable debate about whether disaster models can rationalize the equity premiu...
Twenty years ago, Thomas A. Rietz (1988) showed that infrequent, large drops in consumption make the...
After lying dormant for more than two decades, the rare disaster framework has emerged as a leading ...
Although the threat of rare economic disasters can have large effect on asset prices, difficulty in ...
When utility is nonseparable in nondurable and durable consumption and the elastic-ity of substituti...
We present a consumption-based model that explains a wide variety of dynamic asset pricing phenomena...
financial support from the Aronson+Johson+Ortiz fellowship through the Rodney L. White Cente
We examine the pricing of aggregate volatility risk in the cross-section of stock returns. Consisten...
Why do value stocks have higher average returns than growth stocks, despite having lower risk? Why d...
A possible explanation of the equity premium puzzle is that there is a small probability of a large ...
Why is the equity premium so high, and why are stocks so volatile? Why are stock returns in excess o...
After lying dormant for more than two decades, the rare disaster framework has emerged as a leading ...
After laying dormant for more than two decades, the rare disaster framework has emerged as a leading...
I review the disaster explanation of the equity premium puzzle, discussed in Barro (2006) and Rietz ...
This paper incorporates a time-varying severity of disasters into the hypothesis proposed by Rietz (...
There has been a considerable debate about whether disaster models can rationalize the equity premiu...
Twenty years ago, Thomas A. Rietz (1988) showed that infrequent, large drops in consumption make the...
After lying dormant for more than two decades, the rare disaster framework has emerged as a leading ...
Although the threat of rare economic disasters can have large effect on asset prices, difficulty in ...
When utility is nonseparable in nondurable and durable consumption and the elastic-ity of substituti...
We present a consumption-based model that explains a wide variety of dynamic asset pricing phenomena...
financial support from the Aronson+Johson+Ortiz fellowship through the Rodney L. White Cente
We examine the pricing of aggregate volatility risk in the cross-section of stock returns. Consisten...
Why do value stocks have higher average returns than growth stocks, despite having lower risk? Why d...
A possible explanation of the equity premium puzzle is that there is a small probability of a large ...