UZH-Logo

Maintenance Infos

Asset prices with temporary shocks to consumption


Pohl, Walter; Wilms, Ole; Schmedders, Karl (2014). Asset prices with temporary shocks to consumption. Swiss Finance Institute Research Paper 14-41, University of Zurich.

Abstract

Most standard asset-pricing models assume that all shocks to consumption are permanent. We relax this assumption and allow also for temporary shocks. The implications of our model are dramatically different from those obtained in the prior literature. A canonical and parsimonious asset pricing model with CRRA preferences and temporary shocks can reproduce the equity premium, high return volatility and return predictability with a coefficient of relative risk aversion below ten. This finding suggests that temporary shocks can play an important role in explaining asset pricing puzzles

Most standard asset-pricing models assume that all shocks to consumption are permanent. We relax this assumption and allow also for temporary shocks. The implications of our model are dramatically different from those obtained in the prior literature. A canonical and parsimonious asset pricing model with CRRA preferences and temporary shocks can reproduce the equity premium, high return volatility and return predictability with a coefficient of relative risk aversion below ten. This finding suggests that temporary shocks can play an important role in explaining asset pricing puzzles

Altmetrics

Downloads

14 downloads since deposited on 16 Oct 2014
14 downloads since 12 months
Detailed statistics

Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:2014
Deposited On:16 Oct 2014 12:19
Last Modified:15 Apr 2016 06:10
Series Name:Swiss Finance Institute Research Paper
Number of Pages:47
Free access at:Official URL. An embargo period may apply.
Official URL:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2450090
Other Identification Number:merlin-id:10264
Permanent URL: https://doi.org/10.5167/uzh-99453

Download

[img]
Preview
Filetype: PDF
Size: 642kB

TrendTerms

TrendTerms displays relevant terms of the abstract of this publication and related documents on a map. The terms and their relations were extracted from ZORA using word statistics. Their timelines are taken from ZORA as well. The bubble size of a term is proportional to the number of documents where the term occurs. Red, orange, yellow and green colors are used for terms that occur in the current document; red indicates high interlinkedness of a term with other terms, orange, yellow and green decreasing interlinkedness. Blue is used for terms that have a relation with the terms in this document, but occur in other documents.
You can navigate and zoom the map. Mouse-hovering a term displays its timeline, clicking it yields the associated documents.

Author Collaborations