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Ambiguity, long-run risks, and asset prices

Wei, Bin - 2021

I generalize the long-run risks (LRR) model of Bansal and Yaron (2004) by incorporating recursive smooth ambiguity aversion preferences from Klibanoff et al. (2005, 2009) and time-varying ambiguity. Relative to the Bansal-Yaron model, the generalized LRR model is as tractable but more flexible...

Persistent link: https://www.econbiz.de/10012617667

Ambiguity and the historical equity premium

Collard, Fabrice; Mukerji, Sujoy; Sheppard, Kevin; … - In: Quantitative economics : QE ; journal of the … 9 (2018) 2, pp. 945-993

rates. The single agent, in a dynamic exchange economy, treats the conditional uncertainty about the consumption and …‐free rate in data and measure the uncertainty each period conditional on the actual, observed history of (U.S.) macroeconomic … growth outcomes. Ambiguity aversion accentuates the effect of conditional uncertainty endogenously in a dynamic way …

Persistent link: https://www.econbiz.de/10011994544

Asset Pricing with Idiosyncratic Consumption Risk and Limited Participation

Semenov, Andrei - Department of Economics, York University - 2004

A growing body of literature suggests limited asset market participation as a plausible explanation of the empirical failure of the standard consumption capital asset pricing model (CCAPM). Correct identification of capital markets investors is, however, often impossible due to imperfection of...

Persistent link: https://www.econbiz.de/10005357407

Futures Market Approach to Understanding Equity Premium Puzzle

Kim, Bryce - 2016

In this paper, another factor that affects equity risk premium is derived from a simple classical monetary model, which basically adds back labor-leisure to a simple consumption-only consumption-based asset pricing model. If every present/future good is traded at time t=0, just as in traditional...

Persistent link: https://www.econbiz.de/10012996101

Macroeconomic Disasters and the Equity Premium Puzzle : Are Emerging Countries Riskier?

Horvath, Jaroslav - 2019

Not necessarily. I provide evidence that advanced countries' equity premium and consumption growth differ significantly from those of emerging countries. I then estimate distinct disaster risk parameters for these two country groups. My Bayesian analysis demonstrates that in some aspects...

Persistent link: https://www.econbiz.de/10012902819

Time Variations in the Equity Premium : Is It Habit Formation or Loss Aversion?

Monnin, Pierre - 2009

The large spread between equity returns and risk-free rates (the "equity premium puzzle") has been the subject of intense debate. Two main families of models claim to solve this puzzle: habit-formation models and loss-aversion models. The goal of this paper is to assess empirically which of them...

Persistent link: https://www.econbiz.de/10013155300

Wage rigidity : a solution to several asset pricing puzzles

Favilukis, Jack; Lin, Xiaoji - 2012

In standard production models wage volatility is far too high and equity volatility is far too low. A simple modification - sticky wages due to infrequent resetting together with a CES production function - leads to both (i) smoother wages and (ii) higher equity volatility. Furthermore, the...

Persistent link: https://www.econbiz.de/10009625907

Life with Habit and Expectation : A New Explanation of the Equity Premium Puzzle

Cover, James Peery - 2020

Previous writers have attempted to resolve the equity premium puzzle by employing a utility function that depends on current consumption minus (or relative to) past habit consumption. This paper points out that an individual's current utility may also depend upon how well off in the recent past...

Persistent link: https://www.econbiz.de/10012855578

The Equity Premium Puzzle Solution : Incentives to Under-Report Inflation

Korsos, Laszlo - 2020

The biggest and most well-known unsolved problem in academic finance is famously referred to as the Equity Premium Puzzle. It refers to the unexplained phenomenon that for over 100 years the average return on a well-diversified portfolio of equities has far outperformed that of risk-free,...

Persistent link: https://www.econbiz.de/10012838903

Ambiguity and the historical equity premium

Collard, Fabrice; Mukerji, Sujoy; Sheppard, Kevin; … - 2017

rates. The single agent, in a dynamic exchange economy, treats the conditional uncertainty about the consumption and …-free rate in data and measure the uncertainty each period conditional on the actual, observed histroy of (U.S.) macroeconomic … growth outcomes. Ambiguity aversion accentuates the conditional uncertainty endogenously in a dynamic way, depending on the …

Persistent link: https://www.econbiz.de/10011756113