  I introduce a model-free methodology to assess the impact of disaster risk on
the market return. Using S&P500 returns and the risk-neutral quantile function
derived from option prices, I employ quantile regression to estimate local
differences between the conditional physical and risk-neutral distributions.
The results indicate substantial disparities primarily in the left-tail,
reflecting the influence of disaster risk on the equity premium. These
differences vary over time and persist beyond crisis periods. On average, the
bottom 5% of returns contribute to 17% of the equity premium, shedding light on
the Peso problem. I also find that disaster risk increases the stochastic
discount factor's volatility. Using a lower bound observed from option prices
on the left-tail difference between the physical and risk-neutral quantile
functions, I obtain similar results, reinforcing the robustness of my findings.
