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Lustig, Hanno; van Nieuwerburgh, Stijn; Verdelhan, Adrien - C.E.P.R. Discussion Papers - 2012

We derive new estimates of total wealth, the returns on total wealth, and the wealth effect on consumption. We estimate the prices of aggregate risk from bond yields and stock returns using a no-arbitrage model. Using these risk prices, we compute total wealth as the price of a claim to...

Persistent link: https://www.econbiz.de/10011083953

Endogenous Market Thinness and Stock Price Volatility

Pagano, Marco - C.E.P.R. Discussion Papers - 1986

resulting volatility can induce risk-averse transactors who face transaction costs to desert these markets altogether. Thus … thinness and the consequent price volatility may become joint self-perpetuating features of an equity market, whatever the … volatility of asset fundamentals. If, however, appropriate incentive schemes are adopted to encourage entry of additional …

Persistent link: https://www.econbiz.de/10005662005

Political Uncertainty and Risk Premia

Pástor, Luboš; Veronesi, Pietro - C.E.P.R. Discussion Papers - 2011

We study the pricing of political uncertainty in a general equilibrium model of government policy choice. We find that political uncertainty commands a risk premium whose magnitude is larger in poorer economic conditions. Political uncertainty reduces the value of the implicit put protection...

Persistent link: https://www.econbiz.de/10009320399

Explaining The Equity Risk Premium

Lungu, Laurian; Minford, Patrick - C.E.P.R. Discussion Papers - 2005

We develop a simple overlapping generations model in which the young have a choice in investing in equities and index-linked bonds. Projections of share price uncertainty over a 30-year period show that the risk associated with such a long-term investment predicts an equity premium that matches...

Persistent link: https://www.econbiz.de/10005667120

Real Interest Rates and Central Bank Operating Procedures

Canzoneri, Matthew B; Dellas, Harris - C.E.P.R. Discussion Papers - 1995

In the years following the influential article of Poole (1970), many central banks reoriented their operating procedures to focus more on interest rates and less on monetary aggregates. The rapid restructuring of global financial markets was thought to have led to instability in standard...

Persistent link: https://www.econbiz.de/10005667132

Why Do Emerging Economies Borrow Short Term?

Broner, Fernando A; Lorenzoni, Guido; Schmukler, Sergio - C.E.P.R. Discussion Papers - 2007

We argue that emerging economies borrow short term due to the high risk premium charged by bondholders on long-term debt. First, we present a model where the debt maturity structure is the outcome of a risk sharing problem between the government and bondholders. By issuing long-term debt, the...

Persistent link: https://www.econbiz.de/10005789190

The Irrelevance of Market Incompleteness for the Price of Aggregate Risk

Krueger, Dirk; Lustig, Hanno - C.E.P.R. Discussion Papers - 2006

In models with a large number of agents who have constant relative risk aversion (CRRA) preferences, the absence of insurance markets for idiosyncratic labour income risk has no effect on the premium for aggregate risk if the distribution of idiosyncratic risk is independent of aggregate shocks....

Persistent link: https://www.econbiz.de/10005791307

Options For The Exchange Rate Policies Of The EU Accession Countries (And Other Emerging Market Economies)

Bofinger, Peter; Wollmershaeuser, Timo - C.E.P.R. Discussion Papers - 2000

We develop an institutional framework for central banks that try to pursue a stability-oriented monetary policy with the strategy of exchange rate targeting. Recent experience shows that a crucial element of this approach is to avoid destabilizing capital inflows. Policy makers can exert...

Persistent link: https://www.econbiz.de/10005791576

Risk Premia In The Term Structure Of Interest Rates: A Panel Data Approach

Bams, Dennis; Wolff, Christian C - C.E.P.R. Discussion Papers - 2000

This paper proposes a panel data approach to modeling the risk premium in the term structure of interest rates. Specifically, we develop a fixed maturity/random time effects model that implies a time-invariant one-factor model. Our approach allows us to disentangle risk premia and unexpected...

Persistent link: https://www.econbiz.de/10005123603

Should Argentina Adopt The US Dollar?

Hughes Hallett, Andrew; Myrvin, Anthony - C.E.P.R. Discussion Papers - 2000

A popular suggestion among emerging or transition economies is to 'dollarize' or 'euro-ize'; that is to adopt the currency of a larger, richer neighbour in order to import the monetary discipline and financial stability of that neighbour. This paper examines the pros and cons of that suggestion...

Persistent link: https://www.econbiz.de/10005123613

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