The model yields the following results. First, the model is consistent with volatility clustering or GARCH e¤ects. The market price of risk, which is the instantaneous component of stock return volatility, has three components: endowment risk, sentiment risk and solvency risk. These three components are persistent, hence the model reproduces volatility clustering or GARCH e¤ects. Endowment risk is persistent because the "two-trees" feature of the model imply that endowment risk is proportional to the shares of aggregate endowment, which uctuate randomly between zero and one. Sentiment risk is persistent because it is proportional to the optimal share of aggregate consumption which uctuate randomly between zero and one
