%0 Journal Article %1 Bansal:JF:2004 %A Bansal, Ravi %A Yaron, Amir %D 2004 %I Blackwell Science Inc %J The Journal of Finance %K equity-premium long-run-risk %N 4 %P 1481-1509 %R 10.1111/j.1540-6261.2004.00670.x %T Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles %U http://dx.doi.org/10.1111/j.1540-6261.2004.00670.x %V 59 %X We model consumption and dividend growth rates as containing (1) a small long-run predictable component, and (2) fluctuating economic uncertainty (consumption volatility). These dynamics, for which we provide empirical support, in conjunction with Epstein and Zin's (1989) preferences, can explain key asset markets phenomena. In our economy, financial markets dislike economic uncertainty and better long-run growth prospects raise equity prices. The model can justify the equity premium, the risk-free rate, and the volatility of the market return, risk-free rate, and the price–dividend ratio. As in the data, dividend yields predict returns and the volatility of returns is time-varying.

@article{Bansal:JF:2004, abstract = {We model consumption and dividend growth rates as containing (1) a small long-run predictable component, and (2) fluctuating economic uncertainty (consumption volatility). These dynamics, for which we provide empirical support, in conjunction with Epstein and Zin's (1989) preferences, can explain key asset markets phenomena. In our economy, financial markets dislike economic uncertainty and better long-run growth prospects raise equity prices. The model can justify the equity premium, the risk-free rate, and the volatility of the market return, risk-free rate, and the price–dividend ratio. As in the data, dividend yields predict returns and the volatility of returns is time-varying.}, added-at = {2014-10-30T17:44:35.000+0100}, author = {Bansal, Ravi and Yaron, Amir}, biburl = {https://www.bibsonomy.org/bibtex/227fd2916db5dbc302363360b8eae40c0/fcqms}, description = {Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles - Bansal - 2005 - The Journal of Finance - Wiley Online Library}, doi = {10.1111/j.1540-6261.2004.00670.x}, interhash = {ba6786f419167a7e31946264ff179170}, intrahash = {27fd2916db5dbc302363360b8eae40c0}, issn = {1540-6261}, journal = {The Journal of Finance}, keywords = {equity-premium long-run-risk}, number = 4, pages = {1481-1509}, publisher = {Blackwell Science Inc}, timestamp = {2014-10-30T17:44:35.000+0100}, title = {Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles}, url = {http://dx.doi.org/10.1111/j.1540-6261.2004.00670.x}, volume = 59, year = 2004 }