Discussion Of? Long-Run Risks And Risk Compensation In Equity Markets?

Bansal and his co-authors have produced a series of important and provocative papers that demonstrate how low-frequency risk can provide a justification for observed risk premia. Bansal summarizes this work and helps us understand the linkages between long-run risk in consumption and long-run risk in financial securities. Since he does such a nice job of explaining the economics of the approach, I focus on a few issues raised by Bansal's work and by some of my own.