Before revision:  Besides establishing the existence of an equilibrium, our main result shows that the resulting equilibrium can display a lower risk-free rate and a higher risk premium relative to the usual Pareto efficient equilibrium in complete markets.
After revision:  Besides establishing the existence of an equilibrium, our main result shows that if the investors' unspanned income has stochastic countercyclical volatility, the resulting equilibrium can display a lower risk-free rate and a higher risk premium relative to the usual Pareto efficient equilibrium in complete markets.