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Risk premia in general equilibrium
Posch, Olaf - 2010
asymmetric risk premia over the business cycle. These (empirical) key features become relevant, and asset market implications …-form expressions for the risk premium in production economies. In contrast to endowment economies, the curvature of the policy … functions affects the risk premium through controlling the individual's effective risk aversion. …
Persistent link: https://www.econbiz.de/10010270538
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Dynamic trading and asset prices : Keynes vs. Hayek
Cespa, Giovanni; Vives, Xavier - 2009
We investigate the dynamics of prices, information and expectations in a competitive, noisy, dynamic asset pricing equilibrium model. We show that prices are farther away from (closer to) fundamentals compared with average expectations if and only if traders over- (under-) rely on public...
Persistent link: https://www.econbiz.de/10010272747
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Modeling optimism and pessimism in the foreign exchange market
de Grauwe, Paul; Kaltwasser, Pablo Rovira - 2007
In this paper we model how the existence of different beliefs about the underlying fundamental value of a currency affects the dynamics of the exchange rate. We find that a divergence of beliefs creates the potential for waves of optimism and pessimism that alternate in an unpredictable way....
Persistent link: https://www.econbiz.de/10010273768
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How should the distant future be discounted when discount rates are uncertain?
Gollier, Christian; Weitzman, Martin L. - 2009
probabilities are adjusted for risk, the two approaches are identical. What we would wish a reader to take away from this paper is …
Persistent link: https://www.econbiz.de/10010274007
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Higher order expectations, illiquidity, and short-term trading
Cespa, Giovanni; Vives, Xavier - 2011
We propose a theory that jointly accounts for an asset illiquidity and for the asset price potential over-reliance on … price risk and illiquidity. Therefore, a highly illiquid market implies higher expected returns from contrarian strategies …
Persistent link: https://www.econbiz.de/10010274821
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A note on the computation of the equity premium and the market value of firm equity
Heer, Burkhard; Maußner, Alfred - 2010
Turnovsky (1995) derives in a continuous-time model of a decentralized economy that the correct specification of the firm's objective function is to maximize the initial value of its outstanding securities. The firm value is the discounted flow of real earnings. For the discrete-time version of...
Persistent link: https://www.econbiz.de/10010275839
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Log-normal approximation of the equity premium in the production model
Heer, Burkhard; Maußner, Alfred - 2010
The conditional equity premium in the model with production is often approximated by assuming a jointly log-normal distribution of the marginal rate of substitution in consumption and the marginal productivity of capital. We show that, for standard parameterization, this premium is about one...
Persistent link: https://www.econbiz.de/10010275855
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Predictability of asset returns and the efficient market hypothesis
Pesaran, Mohammad Hashem - 2010
considers the evidence on return predictability, risk aversion and market efficiency. The paper then focuses on the theoretical …
Persistent link: https://www.econbiz.de/10010276273
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Reputation, price, and death: an empirical analysis of art price formation
Ursprung, Heinrich W.; Wiermann, Christian - 2008
We analyze how an artist's death influences the market prices of her works of art. Death has two opposing effects on art prices. By irrevocably restricting the artist's oeuvre, prices, ceteris paribus, increase when the artist dies. On the other hand, an untimely death may well frustrate the...
Persistent link: https://www.econbiz.de/10010276896
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Asset pricing with uncertain betas: A long-term perspective
Gollier, Christian - 2013
How should one evaluate investment projects whose CCAPM betas are uncertain? This question is particularly crucial for projects yielding long-lasting impacts on the economy, as is the case for example for many green investments. We define the notion of a certainty equivalent beta. We show that...
Persistent link: https://www.econbiz.de/10010291514