Ravi Bansal and Amir Yaron present a model that explains key observed asset market phenomena, such as the equity premium, low risk-free rate, and ex-post volatilities of market returns, real risk-free rates, and price-dividend ratios. The model incorporates dividend and consumption growth rates with a small predictable component and time-varying economic uncertainty (growth rate volatility). The authors provide empirical support for their model's dynamics and show that it can justify the observed asset market anomalies. The model suggests that news about growth rates significantly alters agents' perceptions of long-run expected growth rates and growth rate uncertainty, leading to a large equity risk premium, low risk-free interest rate, and high market volatility. The paper also discusses the separation between risk aversion and the elasticity of substitution parameters in Epstein and Zin (1989) preferences, which is crucial for the model's implications. The authors estimate the model's parameters and find that the estimated values lie within plausible ranges. The model's predictions are consistent with empirical evidence, including the impact of price-dividend ratios on market risk premiums and the stochastic nature of market returns.Ravi Bansal and Amir Yaron present a model that explains key observed asset market phenomena, such as the equity premium, low risk-free rate, and ex-post volatilities of market returns, real risk-free rates, and price-dividend ratios. The model incorporates dividend and consumption growth rates with a small predictable component and time-varying economic uncertainty (growth rate volatility). The authors provide empirical support for their model's dynamics and show that it can justify the observed asset market anomalies. The model suggests that news about growth rates significantly alters agents' perceptions of long-run expected growth rates and growth rate uncertainty, leading to a large equity risk premium, low risk-free interest rate, and high market volatility. The paper also discusses the separation between risk aversion and the elasticity of substitution parameters in Epstein and Zin (1989) preferences, which is crucial for the model's implications. The authors estimate the model's parameters and find that the estimated values lie within plausible ranges. The model's predictions are consistent with empirical evidence, including the impact of price-dividend ratios on market risk premiums and the stochastic nature of market returns.