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dc.creatorBranger, Nicole
dc.creatorGrüning, Patrick
dc.creatorKraft, Holger
dc.creatorMeinerding, Christoph
dc.date.accessioned2021-09-28T09:18:17Z
dc.date.available2021-09-28T09:18:17Z
dc.date.issued2014-03-25
dc.identifier.urihttps://fif.hebis.de/xmlui/handle/123456789/2135
dc.description.abstractWe analyze the equilibrium in a two-tree (sector) economy with two regimes. The output of each tree is driven by a jump-diffusion process, and a downward jump in one sector of the economy can (but need not) trigger a shift to a regime where the likelihood of future jumps is generally higher. Furthermore, the true regime is unobservable, so that the representative Epstein-Zin investor has to extract the probability of being in a certain regime from the data. These two channels help us to match the stylized facts of countercyclical and excessive return volatilities and correlations between sectors. Moreover, the model reproduces the predictability of stock returns in the data without generating consumption growth predictability. The uncertainty about the state also reduces the slope of the term structure of equity. We document that heterogeneity between the two sectors with respect to shock propagation risk can lead to highly persistent aggregate price-dividend ratios. Finally, the possibility of jumps in one sector triggering higher overall jump probabilities boosts jump risk premia while uncertainty about the regime is the reason for sizeable diffusive risk premia.
dc.rightsAttribution-ShareAlike 4.0 International
dc.rights.urihttp://creativecommons.org/licenses/by-sa/4.0/
dc.subjectFinancial Markets
dc.titleAsset Pricing Under Uncertainty About Shock Propagation
dc.typeWorking Paper
dc.source.filename34_SSRN-id2360455
dc.identifier.safeno34
dc.subject.keywordsgeneral equilibrium
dc.subject.keywordscontagion risk
dc.subject.keywordspartial information
dc.subject.keywordsfiltering
dc.subject.keywordsrecursive utility
dc.subject.jelG01
dc.subject.jelG12
dc.subject.topic1average
dc.subject.topic1repeat
dc.subject.topic1veronesi
dc.subject.topic2single
dc.subject.topic2relative
dc.subject.topic2rate
dc.subject.topic3barro
dc.subject.topic3finally
dc.subject.topic3depicts
dc.subject.topic1nameSaving and Borrowing
dc.subject.topic2nameMacro Finance
dc.subject.topic3nameConsumption
dc.identifier.doi10.2139/ssrn.2360455


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Attribution-ShareAlike 4.0 International
Except where otherwise noted, this item's license is described as Attribution-ShareAlike 4.0 International