We consider a consumption and investment problem where the market presents different
regimes. An investor taking decisions continuously in time selects a consumption …

This essay reviews the family of models that seek to provide aggregate risk based
explanations for the empirically observed equity premium. Theories based on non-expected …

This paper studies equilibrium in a pure exchange economy with unobservable Markov
switching growth regimes and beliefs-dependent risk aversion (BDRA). Risk aversion is …

Explanations of changes in asset prices as being due to exogenous changes in risk
appetite, although arguably controversial, have been popular in the financial community and …

This paper constructs a simple dynamic asset pricing model that incorporates recent
evidence on the influence of immediate emotions on risk preferences. Investors derive direct …

I investigate the asset pricing and business cycle implications of a dynamic stochastic
general equilibrium model with human capital and education. Key features of the model are …

We introduce a new preference structure—age‐dependent increasing risk aversion (IRA)—
in a three‐period overlapping generations model with borrowing constraints, and examine …

We propose a new approach to utilities in (state) complete markets that is consistent with
state-dependent utilities. Full solutions of the optimal consumption and portfolio problem are …

We investigate an economy of heterogeneous agents that cannot specify all exogenous
welfare-relevant events and consequently view the impact of unforeseen contingencies as …

Abstract Changes in risk perception have been used in various contexts to explain shorter-
term developments in financial markets, as part of a mechanism amplifying fluctuations in …