Covariances versus Characteristics in General Equilibrium
---- Acknowledgements ----
We thank Frederico Belo, Jonathan Berk, Michael Brennan, Andrew Chen, Bob Dittmar, Wayne Ferson, Adlai Fisher, Kewei Hou, Lars-Alexander Kuehn, Mike Lemmon, Stavros Panageas, Jules van Binsbergen, Toni Whited, and seminar participants at the University of British Columbia's Phillips, Hager, and North Centre for Financial Research Summer Finance Conference in 2011 for helpful discussions. The Matlab and SAS programs used to produce the results reported in the paper are available on the authors' Web sites. All remaining errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.