Journal Article

Long-run risks and financial markets

Abstract: The recently developed long-run risks asset pricing model shows that concerns about long-run expected growth and time-varying uncertainty (i.e., volatility) about future economic prospects drive asset prices. These two channels of economic risks can account for the risk premia and asset price fluctuations. In addition, the model can empirically account for the cross-sectional differences in asset returns. Hence, the long-run risks model provides a coherent and systematic framework for analyzing financial markets.

Keywords: Financial markets; Risk;

Status: Published in Proceedings of the Thirty-First Annual Economic Policy Conference of the Federal Reserve Bank of St. Louis : Frontiers in Monetary Policy Research

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Review

Publication Date: 2007

Volume: 89

Issue: Jul

Pages: 283-300