This dissertation is comprised of two chapters, each studying the role of firm and household heterogeneity in shaping asset prices and the broader macroeconomy. In the first chapter, I seek to understand the puzzling fact that, over the last half-century, economic growth stagnated but stock-market wealth boomed. I present evidence that declining innovation productivity reconciles these trends. At the macro level, I document that R&D spending has fallen relative to value, while M&A spending has doubled relative to R&D. At the micro level, most of the increase in aggregate valuation ratios is explained by a reallocation of sales shares toward high-valuation firms. Using a Schumpeterian model of growth and asset prices, I find that declining innovation productivity explains these facts. When innovation productivity falls, R&D falls and M&A rises. This concentrates production into the hands of the most efficient (high-valuation) incumbents, causing aggregate value to boom. Quantitatively, this explains most of the decline in growth and the rise in valuations. It also helps explain other salient trends, including declining firm entry, rising concentration, and falling interest rates. While stock-market wealth boomed, the present value of consumption (consumer welfare) stagnated with output. In the second chapter, I study the importance of idiosyncratic endowment shocks for aggregate asset prices in continuous time. My generalized framework accommodates jumps and recursive preferences. I show that countercyclical cross-sectional risk is irrelevant to risk premia if and only if all agents have time-additive power utility and cross-sectional risk is uncorrelated with aggregate consumption risk. Contrary to conventional wisdom, Poisson jump risks make no difference. Jumps are, however, important for explaining the data. I calibrate a general-equilibrium model in which numerous agents face uninsurable idiosyncratic human-capital disasters. Using Social Security Administration income data, I show that time-varying cross-sectional income skewness is an important driver of asset price dynamics.