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Consumption-based asset pricing with rare disaster risk : a simulated method of moments approach ; conference paper

Grammig, Joachim; Sönksen, Jantje - 2014

The rare disaster hypothesis suggests that the extraordinarily high postwar U.S. equity premium resulted because investors ex ante demanded compensations for unlikely but calamitous risks that they happened not to incur. While convincing in theory, empirical tests of the rare disaster...

Persistent link: https://www.econbiz.de/10010491152

Give me strong moments and time : combining GMM and SMM to estimate long-run risk asset pricing models ; conference paper

Grammig, Joachim; Schaub, Eva-Maria - 2014

The long-run consumption risk (LRR) model is a convincing approach towards resolving prominent asset pricing puzzles. Whilst the simulated method of moments (SMM) provides a natural framework to estimate its deep parameters, caveats concern model solubility and weak identification. We propose a...

Persistent link: https://www.econbiz.de/10010490550

Coherent price systems and uncertainty-neutral valuation : conference paper

Beißner, Patrick - 2013 - This version: 28 February, 2013

We consider fundamental questions of arbitrage pricing arising when the uncertainty model incorporates volatility … uncertainty. With a standard probabilistic model, essential equivalence between the absence of arbitrage and the existence of an … martingale measure sets, in a dynamic trading framework under absence of prior depending arbitrage. We prove the existence of …

Persistent link: https://www.econbiz.de/10010338399

Cyclical asset returns in the consumption and investment goods sector : conference paper

Heer, Burkhard; Maußner, Alfred; Süssmuth, Bernd - 2014

We document the empirical fact that asset prices in the consumption-goods and investment-goods sector behave almost identically in the US economy. In order to derive the cyclical behavior of the equity returns in these two sectors, we onsider a standard two-sector real-business cycle model with...

Persistent link: https://www.econbiz.de/10010482490

Risk of rare disasters, Euler equation errors and the performance of the C-CAPM : conference paper

Posch, Olaf; Schrimpf, Andreas - 2013

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...

Persistent link: https://www.econbiz.de/10010338284

Asset pricing without garbage : conference paper

Kroencke, Tim-Alexander - 2014

This paper provides an explanation why garbage as a measure of consumption implies a several times lower coefficient of relative risk aversion in the consumption-based asset pricing model than consumption based on the official National Income and Product Accounts (NIPA): Unlike garbage, NIPA...

Persistent link: https://www.econbiz.de/10010486748

Decomposing risk in dynamic stochastic general equilibrium : conference paper

Lan, Hong; Meyer-Gohde, Alexander - 2014 - This version: December 19, 2013

We analyze the theoretical moments of a nonlinear approximation to real business cycle model with stochastic volatility and recursive preferences. We find that the conditional heteroskedasticity of stochastic volatility operationalizes a time-varying risk adjustment channel that induces...

Persistent link: https://www.econbiz.de/10010487749