scholarly journals Risk Aversion, the Labor Margin, and Asset Pricing in DSGE Models

2009 ◽  
pp. 1.000-39.000 ◽  
Author(s):  
Eric T. Swanson ◽  
Keyword(s):  
Asset Pricing ◽  
Risk Aversion ◽  
Dsge Models

scholarly journals Computational Methods for Production-Based Asset Pricing Models with Recursive Utility

2019 ◽  
Vol 0 (0) ◽  
Author(s):  
Eric Mark Aldrich ◽  
Howard Kung
Keyword(s):  
Asset Pricing ◽  
Solution Method ◽  
Value Function ◽  
Polynomial Solution ◽  
Dsge Models ◽  
Recursive Utility ◽  
Solution Quality ◽  
Global Method ◽  
Asset Pricing Models ◽  
Solution Methods

Abstract We compare local and global polynomial solution methods for DSGE models with Epstein- Zin-Weil utility. We show that model implications for macroeconomic quantities are relatively invariant to choice of solution method but that a global method can yield substantial improvements for asset prices and welfare costs. The divergence in solution quality is highly dependent on parameters which affect value function sensitivity to TFP volatility, as well as the magnitude of TFP volatility itself. This problem is pronounced for calibrations at the extreme of those accepted in the asset pricing literature and disappears for more traditional macroeconomic parameterizations.

scholarly journals Skewness Preference and Asset Pricing: Evidence from the Japanese Stock Market

2019 ◽  
Vol 12 (3) ◽  
pp. 149
Author(s):  
Yang ◽  
Nguyen
Keyword(s):  
Asset Pricing ◽  
Stock Market ◽  
Risk Aversion ◽  
Risk Premium ◽  
Asset Returns ◽  
Positive Skewness ◽  
Japanese Stock Market ◽  
Skewness Preference ◽  
Using Data ◽  
Investor Preference

Previous studies have shown that investor preference for positive skewness creates a potential premium on negatively skewed assets. In this paper, we attempt to explore the connection between investors’ skewness preferences and corresponding demand for a risk premium on asset returns. Using data from the Japanese stock market, we empirically study the significance of risk aversion with skewness preference that potentially delivers a premium. Compared to studies on other stock markets, our finding suggests that Japanese investors exhibit preference for positively skewed assets, but do not display dislike for ones that are negatively skewed. This implies that investors from different countries having dissimilar attitudes toward risk may possess different preferences toward positive skewness, which would result in a different magnitude of expected risk premium on negatively skewed assets.

scholarly journals Asset Pricing with Horizon-Dependent Risk Aversion

2014 ◽  
Author(s):  
Marianne Andries ◽  
Thomas M. Eisenbach ◽  
Martin C. Schmalz
Keyword(s):  
Asset Pricing ◽  
Risk Aversion

scholarly journals Dynamic General Equilibrium and T-Period Fund Separation

2010 ◽  
Vol 45 (2) ◽  
pp. 369-400 ◽  
Author(s):  
Anke Gerber ◽  
Thorsten Hens ◽  
Peter Woehrmann
Keyword(s):  
Asset Pricing ◽  
Risk Aversion ◽  
General Equilibrium ◽  
Asset Allocation ◽  
Mutual Fund ◽  
Asset Prices ◽  
Dynamic General Equilibrium ◽  
Discount Factors ◽  
Equilibrium Asset Pricing ◽  
Mutual Fund Separation

AbstractIn a dynamic general equilibrium model, we derive conditions for a mutual fund separation property by which the savings decision is separated from the asset allocation decision. With logarithmic utility functions, this separation holds for any heterogeneity in discount factors, while the generalization to constant relative risk aversion holds only for homogeneous discount factors but allows for any heterogeneity in endowments. The logarithmic case provides a general equilibrium foundation for the growth-optimal portfolio literature. Both cases yield equilibrium asset pricing formulas that allow for investor heterogeneity, in which the return process is endogenous and asset prices are determined by expected discounted relative dividends. Our results have simple asset pricing implications for the time series as well as the cross section of relative asset prices. It is found that on data from the Dow Jones Industrial Average, a risk aversion smaller than in the logarithmic case fits best.

Asset pricing and risk aversion in the Spanish stock market

1990 ◽  
Vol 14 (2-3) ◽  
pp. 351-369 ◽  
Author(s):  
Aurora Alonso ◽  
Gonzalo Rubio ◽  
Fernando Tusell
Keyword(s):  
Asset Pricing ◽  
Stock Market ◽  
Risk Aversion ◽  
Spanish Stock Market

scholarly journals The Bond Premium in a DSGE Model with Long-Run Real and Nominal Risks

2012 ◽  
Vol 4 (1) ◽  
pp. 105-143 ◽  
Author(s):  
Glenn D Rudebusch ◽  
Eric T Swanson
Keyword(s):  
High Risk ◽  
Risk Aversion ◽  
Dsge Models ◽  
Dsge Model ◽  
Macroeconomic Variables ◽  
Term Premium ◽  
Long Run ◽  
Premium Puzzle ◽  
Economic Risks

The term premium in standard macroeconomic DSGE models is far too small and stable relative to the data—an example of the “bond premium puzzle.” However, in endowment economy models, researchers have generated reasonable term premiums by assuming investors have recursive Epstein-Zin preferences and face long-run economic risks. We show that introducing Epstein-Zin preferences into a canonical DSGE model can also produce a large and variable term premium without compromising the model's ability to fit key macroeconomic variables. Long-run nominal risks further improve the model's empirical fit, but do not substantially reduce the need for high risk aversion. (JEL E13, E31, E43, E44)

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