We study asset pricing when agents face risk and uncertainty and empirically demonstrate that uncertainty has a substantial effect on asset prices. We measure risk with past volatility and uncertainty with the degree of disagreement of professional forecasters, attributing different weights to each forecaster. We run regressions representing the typical risk-return trade-off and augment these regressions with a measure of uncertainty. We find stronger empirical evidence for a uncertainty-return trade-off than for the traditional risk-return trade-off. We investigate the performance of a two-factor model with risk and uncertainty in the cross-section
