This paper undertakes a numerical analysis of the effects of changes in the tax rates on domestic and foreign capital income in a stochastically growing open economy under recursive preferences, in which the rate of time preference, epsilon, and the coefficient of risk aversion, R, can be set...

This paper shows that the consumption-based asset pricing model (C-CAPM) with low-probability disaster risk rationalizes large pricing errors, i.e., Euler equation errors. This result is remarkable, since Lettau and Ludvigson (2009) show that leading asset pricing models cannot explain sizeable...

We establish a class of fully nonlinear conditional expectations. Similarly to the usage of linear expectations when a probabilistic description of uncertainty is present, we observe analogue quantitative and qualitative properties. The type of nonlinearity captures the agents sentiments of...

For a long time the classical expectation hypothesis has been challenged from both empirical and theoretical perspective. Still no one could explain entirely the existent bias between expected future spot rates and forward rates, the so called puzzle in the expectation hypothesis.In this work we...

We develop a structural econometric model to elicit household-specific expectations about future financial asset returns and risk attitudes by using data on observed portfolio holdings and self-assessed willingness to bear financial risk. Our framework assumes that household portfolios are...