The present paper considers a class of general equilibrium economics when the primitive uncertainty model features uncertainty about continuous-time volatility. This requires a set of mutually singular priors, which do not share the same null sets. For this setting we introduce an appropriate...

We develop a conditional capital asset pricing model in continuous-time that allows for stochastic beta exposure. When beta co-moves with market variance and the stochastic discount factor (SDF), beta risk is priced, and the expected return on a stock deviates from the security market line. The...

We analyse the relationships between return calculation methods, risk and observation periods. We show that the mean of a return set calculated using logarithmic returns is less than the mean calculated using simple returns by an amount related to the variance of the set. This implies that there...

Water-related risks are intrinsically linked to both climate and nature challenges and can be closely tied to socio-economic challenges, such as poverty, food security, and domestic and international conflicts. There is increasing evidence that water-related risks are financially material across...

We study an economy subject to recurrent disasters when agents have imprecise information about the frequency and duration of the disasters. Uncertainty about the persistence of states can lead to seemingly pessimistic behavior in bad times and optimistic behavior in good times. In a disaster,...

This study proposes a new indicator of Climate Policy Uncertainty based on newspaper coverage frequency. The indicator currently includes 12 OECD Member Countries and covers the period 1990-2018. The index spikes near major political events and during major discussions around potentially...

Under risk, Arrow-Debreu equilibria can be implemented as Radner equilibria by continuous trading of few long-lived securities. We show that this result generically fails if there is Knightian uncertainty in the volatility. Implementation is only possible if all discounted net trades of the...

We examine if an existing asset pricing model in an unconditional or conditional setting can explain the investment growth anomaly, as represented by higher returns on stocks of the firms with lower growth in capital expenditures. Our results indicate that the conditional Fama–French 3-factor...