Showing 51 - 60 of 444
associated with average returns. We show that the resulting portfolios are likely to capture not only the priced risk associated … with the characteristic, but also unpriced risk. We develop a procedure to remove this unpriced risk using covariance …
Persistent link: https://www.econbiz.de/10012931218
We study the role of information in asset pricing models with long-run cash flow risk. When investors can distinguish … short- from long-run consumption risks (full information), the model generates a sizable equity risk premium only if the … propose a sparsity-based bounded rationality model of long-run risk that is both parsimonious and fully identified from …
Persistent link: https://www.econbiz.de/10012755422
economy tends to damage risk sharing when the composition of collateral is biased toward private assets. As we show that a … stable economy is more propitious to the creation of private collateral, stability makes risk sharing increasingly fragile to … risk sharing to aggregate volatility as predicted by our model …
Persistent link: https://www.econbiz.de/10014243068
In Merton (1987), idiosyncratic risk is priced in equilibrium as a consequence of incomplete diversification. We modify … results in a state-dependent idiosyncratic risk premium that is higher when average idiosyncratic volatility is low, and vice … versa. The data appear to be consistent with a positive state-dependent premium for idiosyncratic risk both in the US and in …
Persistent link: https://www.econbiz.de/10012997911
We investigate the relationship between uncertainty about monetary policy and its transmission mechanism, and economic …-order effect on their dynamics. The data favors a model with two unspanned volatility factors that capture uncertainty about … monetary policy and the term premium. Uncertainty contributes negatively to economic activity. Two dimensions of uncertainty …
Persistent link: https://www.econbiz.de/10013045286
Investor sophistication has lagged behind the growing complexity of retail financial markets. To explore this, we develop a dynamic model to study the interaction between obfuscation and investor sophistication. Taking into account different learning mechanisms within the investor population, we...
Persistent link: https://www.econbiz.de/10013228646
We study the effects of changes in uncertainty about future fiscal policy on aggregate economic activity. Fiscal … consolidation inevitable, there is considerable uncertainty about the policy mix and timing of such budgetary adjustment. To … evaluate the consequences of this increased uncertainty, we first estimate tax and spending processes for the U.S. that allow …
Persistent link: https://www.econbiz.de/10013121070
.S. household survey, we measure ambiguity aversion using custom- designed questions based on Ellsberg urns. As theory predicts …
Persistent link: https://www.econbiz.de/10013087877
We propose a discrete-time stochastic volatility model in which regime switching serves three purposes. First, changes in regimes capture low frequency variations, which is their traditional role. Second, they specify intermediate frequency dynamics that are usually assigned to smooth...
Persistent link: https://www.econbiz.de/10013227022
Techniques of regulated Brownian motion are used to analyze the behavior of the exchange rate when official policy reaction functions are subject to future stochastic changes. We examine exchange-rate dynamics in alternative cases where the authorities promise (i) to confine a floating rate...
Persistent link: https://www.econbiz.de/10013235886