John Y. Campbell's NBER Working Paper 7589 surveys asset pricing, emphasizing the interplay between theory and empirical work, and the tradeoff between risk and return. The paper discusses the stochastic discount factor (SDF), which prices all assets in the economy. The behavior of the term structure of real interest rates restricts the conditional mean of the SDF, while patterns of risk premia restrict its conditional volatility and factor structure. Stylized facts about interest rates, aggregate stock prices, and cross-sectional patterns in stock returns have stimulated new research on optimal portfolio choice, intertemporal equilibrium models, and behavioral finance. The paper outlines the SDF equation, which relates asset prices to expected future payoffs and the SDF. It discusses the implications of the SDF for asset pricing, including the mean and variance of the SDF, risk premia, the equity premium puzzle, and the predictability of aggregate stock returns. The paper also covers the factor structure of the SDF, multifactor models, and the CAPM. It addresses the challenges of empirical work, including the limitations of data and the need for robust models. The paper concludes with a discussion of the implications of these findings for asset pricing and the broader field of finance.John Y. Campbell's NBER Working Paper 7589 surveys asset pricing, emphasizing the interplay between theory and empirical work, and the tradeoff between risk and return. The paper discusses the stochastic discount factor (SDF), which prices all assets in the economy. The behavior of the term structure of real interest rates restricts the conditional mean of the SDF, while patterns of risk premia restrict its conditional volatility and factor structure. Stylized facts about interest rates, aggregate stock prices, and cross-sectional patterns in stock returns have stimulated new research on optimal portfolio choice, intertemporal equilibrium models, and behavioral finance. The paper outlines the SDF equation, which relates asset prices to expected future payoffs and the SDF. It discusses the implications of the SDF for asset pricing, including the mean and variance of the SDF, risk premia, the equity premium puzzle, and the predictability of aggregate stock returns. The paper also covers the factor structure of the SDF, multifactor models, and the CAPM. It addresses the challenges of empirical work, including the limitations of data and the need for robust models. The paper concludes with a discussion of the implications of these findings for asset pricing and the broader field of finance.