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investors, ambiguity aversion generates strong home bias in equity holdings, regardless of beliefs in the CAPM or risk aversion …
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Under risk, Arrow-Debreu equilibria can be implemented as Radner equilibria by continuous trading of few long …
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The present paper considers a class of general equilibrium economics when the primitive uncertainty model features uncertainty about continuous-time volatility. This requires a set of mutually singular priors, which do not share the same null sets. For this setting we introduce an appropriate...
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are (1) the model can generate a high and volatile equity premium while a low and smooth risk-free rate, (2) agents … volatility clusterng and persistence; and (3) Bayesian learning itself is unable to generate a significant and positive risk …
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