Low Risk-Free Rates and Intertemporal Arbitrage

A previous version of the paper circulated under the title “Asset Pricing in a Low Rate Environment”. We are grateful for the helpful comments we received from Andrew Abel, Nir Jaimovich, Urban Jermann, and Narayana Kocherlakota, as well as the participants at the Wharton Brown Bag Seminar, the Bristol Macroeconomics Workshop, the EEA-ESEM Conference and Rochester’s Stockman Memorial Workshop, the BI workshop on Production Based Asset Pricing, the University of Mannheim, Ohio State University, Oxford University and the Tinbergen Institute. Azinovic-Yang is grateful to the Economics Department at the University of Pennsylvania for their kind hospitality and acknowledges support from the Swiss National Science Foundation under grant P500PS 210799, “Macro-Finance with Heterogeneous Households”. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

• November 1, 2023