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This paper incorporates a time-varying intensity of disasters in the Rietz-Barro hypothesis that risk premia result from the possibility of rare, large disasters. During a disaster, an asset's fundamental value falls by a time-varying amount. This in turn generates time-varying risk premia and...
Persistent link: https://www.econbiz.de/10012464923
We present a theory of excess stock market volatility, in which market movements are due to trades by very large …
Persistent link: https://www.econbiz.de/10012466944