Building on the Kaplan-Violante two-account incomplete-markets model, this manuscript shows that once idiosyncratic risk is assumed to rise when asset valuations fall, the aggregate value of each …
This paper builds a flexible-price model in which money's liquidity premium keeps real interest rates from falling when idiosyncratic risk rises, so money reduces investment rather than stabilizing …
PublishedClassicReview of Economic StudiesOnline 25 Sep 2021Published May 2022
This paper shows that spikes in idiosyncratic risk premiums can generate quantitatively plausible recessions -- with employment, consumption, and investment all falling together -- because the risk …
PublishedJournal of Political EconomyOnline 30 Apr 2026Published Jul 2026
This paper proposes and measures the zero-beta rate — the expected return on a portfolio of stocks with zero market beta, constructed to be orthogonal to the SDF innovations spanned by standard …