12  Within the cash-flow-discount model for asset pricing that is expounded in footnote 2, seemingly explosive price dynamics can be generated by a sequence of negative innovations to the risk premium, πt. BIS Review 105/2008  7  2. New channels of interaction  Varying risk premia blur the fundamental connection between asset prices and real economic decisions.
This has been studied extensively and the evidence that I have provided thus far is, after all, but one variation on a traditional theme in financial economics: the risk premium puzzle. But today risk pricing and macroeconomic performance can make contact in ways that are novel and still little known.