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Optimal Monetary Noise in an Economy with Bayesian Consumers and Risk-Averse Investors
Teng, Jimmy - 2013
Autonomous demand shock affects consumption spending. Variation in consumption spending contributes to the volatility in aggregate demand. As the investor is risk averse, volatility of aggregate demand reduces investment. Government injects monetary noise to reduce the volatility in aggregate...
Persistent link: https://www.econbiz.de/10014158665
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Heterogeneity and risk sharing in village economies
Chiappori, Pierre-André; Krislert Samphantharak; … - In: Quantitative economics : QE ; journal of the … 5 (2014) 1, pp. 1-27
Persistent link: https://www.econbiz.de/10010359461
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Heterogeneity and risk sharing in village economies
Chiappori, Pierre-André; Krislert Samphantharak; … - In: Quantitative economics : QE ; journal of the … 5 (2014) 1, pp. 1-27
, we measure heterogeneity in risk aversion among households in Thai villages using a full risk-sharing model, which we … then test allowing for this heterogeneity. There is substantial, statistically significant heterogeneity in estimated risk … preferences are unrelated to wealth or other characteristics. The heterogeneity matters for policy: Although the average household …
Persistent link: https://www.econbiz.de/10011757115
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Implications of Long-Run Risk for Asset Allocation Decisions
Avramov, Doron - 2012
This paper proposes a structural approach to long-horizon asset allocation. In particular, the investor draws inferences about asset returns from a vector autoregression (VAR) with economic restrictions on the intercept, slope, and covariance matrix implied by the long-run risk model of Bansal...
Persistent link: https://www.econbiz.de/10013107285
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Testing Habits in an Asset Pricing Model
d'Addona, Stefano - 2012
We develop an asset pricing model with external habit formation. The model predicts that the effect of consumption shocks on the equity premium depends on the business cycle. We test this empirical implication using a VAR model of the U.S. postwar economy whose parameters are estimated...
Persistent link: https://www.econbiz.de/10013109086
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Monetary policy and asset price overshooting: a rationale for the Wall/Main Street disconnect
Caballero, Ricardo J.; Simsek, Alp - 2022
We analyze optimal monetary policy and its implications for asset prices, when aggregate demand has inertia and responds to asset prices with a lag. If there is a negative output gap, the central bank optimally overshoots aggregate asset prices (asset prices are initially pushed above their...
Persistent link: https://www.econbiz.de/10013093040
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Countercyclical Risks and Portfolio Choice Over the Life Cycle : Evidence and Theory
Shen, Jialu - 2019
I show that countercyclical earnings dynamics can have quantitatively important effects on saving and portfolio choice decisions over the life cycle. During expansions (recessions) when expected future earnings growth is high (low), households save less (more) and also invest a higher (lower)...
Persistent link: https://www.econbiz.de/10012898145
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Testing Habits in an Asset Pricing Model
Boschi, Melisso - 2017
We develop a model of asset pricing assuming that investor's behavior is habit forming. The model predicts that the effect of consumption growth shocks on the risk premium depends on the business cycle phase of the economy. This empirical implication is tested with a Markov-switching VAR model...
Persistent link: https://www.econbiz.de/10012976650
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The Real Explanation of Nominal Bond-Stock Puzzles
Chernov, Mikhail; Lochstoer, Lars A.; Song, Dongho - 2021
We present evidence that the mix of transitory and permanent shocks to consumption is changing over time. We study implications of this finding for asset prices. The uncovered dynamics of consumption implies modestly upward sloping real bond and equity curves, upward sloping nominal yield curve,...
Persistent link: https://www.econbiz.de/10013218634
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A Simple Model of Multiple Equilibria Based on Risk
Costain, James S. - 2000
This paper shows how risk may aggravate fluctuations in economies with imperfect insurance and multiple assets. A two period job matching model is studied, in which risk averse agents act both as workers and as entrepreneurs. They choose between two types of investment: one type is riskless,...
Persistent link: https://www.econbiz.de/10014173791