We derive novel estimates of the equity and variance risk premia that account for intertemporal hedging motives and embed information on the market’s term structure of risk. We show that standard asset pricing models impose restrictions on how intertemporal hedging affects the equity risk premium that are inconsistent with evidence on investors' prudence and higher order risk pricing. Our more flexible framework delivers estimates that are in line with this evidence. Estimates derived from option prices indicate that intertemporal hedging accounts for up to 80% of the equity and variance risk premia, and improve the out-of-sample R2 of market return prediction.