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The Cross-Section and Time-Series of Stock and Bond Returns

Koijen, Ralph S.J. - 2010

Value stocks have higher exposure to innovations in the nominal bond risk premium, which measures the markets' perception of cyclical variation in future output growth, than growth stocks. The ICAPM then predicts a value risk premium provided that good news about future output lowers the...

Persistent link: https://www.econbiz.de/10012462964

Is the Volatility of the Market Price of Risk due to Intermittent Portfolio Re-balancing?

Chien, Yi-Li - 2009

Our paper examines whether the well-documented failure of unsophisticated investors to rebalance their portfolios can help to explain the enormous counter-cyclical volatility of aggregate risk compensation in financial markets. To answer this question, we set up a model in which CRRA-utility...

Persistent link: https://www.econbiz.de/10012463268

The Wealth-Consumption Ratio

Lustig, Hanno - 2008

We set up an exponentially affine stochastic discount factor model for bond yields and stock returns in order to estimate the prices of aggregate risk. We use the estimated risk prices to compute the no-arbitrage price of a claim to aggregate consumption. The price-dividend ratio of this claim...

Persistent link: https://www.econbiz.de/10012464751

Evaluating Asset Pricing Models with Limited Commitment using Household Consumption Data

Krueger, Dirk - 2007

We evaluate the asset pricing implications of a class of models in which risk sharing is imperfect because of limited enforcement of intertemporal contracts. Lustig (2004) has shown that in such a model the asset pricing kernel can be written as a simple function of the aggregate consumption...

Persistent link: https://www.econbiz.de/10012464989

A Multiplier Approach to Understanding the Macro Implications of Household Finance

Chien, YiLi - 2007

Our paper examines the impact of heterogeneous trading technologies for households on asset prices and the distribution of wealth. We distinguish between passive traders who hold fixed portfolios of stocks and bonds, and active traders who adjust their portfolios to changes in expected returns....

Persistent link: https://www.econbiz.de/10012465060

Fiscal Hedging and the Yield Curve

Lustig, Hanno - 2005

We identify a novel, fiscal hedging motive that helps to explain why governments issue more expensive, long-term debt. We analyze optimal fiscal policy in an economy with distortionary labor income taxes, nominal rigidities and nominal debt of various maturities. The government in our model can...

Persistent link: https://www.econbiz.de/10012466989

The Market Price of Aggregate Risk and the Wealth Distribution

Lustig, Hanno - 2005

We introduce limited liability in a model with a continuum of ex ante identical agents who face aggregate and idiosyncratic income risk. These agents can trade a complete menu of contingent claims, but they cannot commit and shares in a Lucas tree serve as collateral to back up their...

Persistent link: https://www.econbiz.de/10012467553

A Theory of Housing Collateral, Consumption Insurance and Risk Premia

Lustig, Hanno - 2004

In a model with housing collateral, a decrease in house prices reduces the collateral value of housing, increases household exposure to idiosyncratic risk, and increases the conditional market price of risk. This collateral mechanism can quantitatively replicate the conditional and the...

Persistent link: https://www.econbiz.de/10012467732

Housing Collateral, Consumption Insurance and Risk Premia : An Empirical Perpective

Lustig, Hanno - 2003

In a model with housing collateral, the ratio of housing wealth to human wealth shifts the conditional distribution of asset prices and consumption growth. A decrease in house prices reduces the collateral value of housing, increases household exposure to idiosyncratic risk, and increases the...

Persistent link: https://www.econbiz.de/10012468738

Foreign Safe Asset Demand and the Dollar Exchange Rate

Jiang, Zhengyang - 2018

We develop a theory that links foreign investors' demand for the safety of U.S. Treasury bonds to the value of the … owning Treasury bonds. Under our theory, we show that the foreign convenience yield can be measured by the 'Treasury basis …. In both datasets, regression evidence strongly supports the theory. Our results help to resolve the exchange rate …

Persistent link: https://www.econbiz.de/10012453275