Beason, TylerSchreindorfer, David2023-01-202023-01-202022-08-010022-3808http://hdl.handle.net/10919/113305We use option prices and realized returns to decompose risk premia into different parts of the return state space. In the data, 8/10 of the average equity premium is attributable to monthly returns below -10%, but returns below -30% matter very little. In contrast, prominent asset pricing models based on habits, long-run risks, rare disasters, undiversifiable idiosyncratic risk, and constrained intermediaries attribute the premium predominantly to returns above -10% or to the extreme left tail. We show that the discrepancy arises from an unrealistically small price of risk for stock market tail events in the models.20 page(s)application/pdfenIn CopyrightRARE DISASTERSRISK-AVERSIONASSETDYNAMICSPRICESArticle - Refereed2023-01-19https://doi.org/10.1086/72039613081537-534X