Macroeconomic Disasters And The Equity Premium Puzzle PDF Download
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| Author | : Jaroslav Horvath |
| Publisher | : |
| Total Pages | : 71 |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
Download Macroeconomic Disasters and the Equity Premium Puzzle Book in PDF, ePub and Kindle
Not necessarily. I provide evidence that advanced countries' equity premium and consumption growth differ significantly from those of emerging countries. I then estimate distinct disaster risk parameters for these two country groups. My Bayesian analysis demonstrates that in some aspects advanced countries are more exposed to disaster risk, while in others their exposure is smaller. Disasters are estimated to be more severe and uncertain in advanced countries, but are on average less persistent. Advanced countries are also more likely to experience a global disaster, whereas disasters in emerging countries tend to be more idiosyncratic. I show that country-group heterogeneity in disaster length and magnitude has the largest impact on equity premium.
| Author | : |
| Publisher | : |
| Total Pages | : 88 |
| Release | : 2017 |
| Genre | : |
| ISBN | : |
Download Can Rare Macroeconomic Disasters Explain the Equity Premium Puzzle? Book in PDF, ePub and Kindle
| Author | : |
| Publisher | : |
| Total Pages | : 91 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
Download The Equity Premium Puzzle and Rare Macroeconomic Disasters Book in PDF, ePub and Kindle
| Author | : Robert J. Barro |
| Publisher | : |
| Total Pages | : 45 |
| Release | : 2011 |
| Genre | : Assets (Accounting) |
| ISBN | : |
Download Rare macroeconomic disasters Book in PDF, ePub and Kindle
The potential for rare macroeconomic disasters may explain an array of asset-pricing puzzles. Our empirical studies of these extreme events rely on long-term data now covering 28 countries for consumption and 40 for GDP. A baseline model calibrated with observed peak-to-trough disaster sizes accords with the average equity premium with a reasonable coefficient of relative risk aversion. High stock-price volatility can be explained by incorporating time-varying long-run growth rates and disaster probabilities. Business-cycle models with shocks to disaster probability have implications for the cyclical behavior of asset returns and corporate leverage, and international versions may explain the uncovered-interest-parity puzzle. Richer models of disaster dynamics allow for transitions between normalcy and disaster, bring in post-crisis recoveries, and use the full time series on consumption. Potential future research includes applications to long-term economic growth and environmental economics and the use of stock-price options and other variables to gauge time-varying disaster probabilities.
| Author | : Robert J. Barro |
| Publisher | : |
| Total Pages | : 39 |
| Release | : 2009 |
| Genre | : Disasters |
| ISBN | : |
Download On the size distribution of macroeconomic disasters Book in PDF, ePub and Kindle
In the rare-disasters setting, a key determinant of the equity premium is the size distribution of macroeconomic disasters, gauged by proportionate declines in per capita consumption or GDP. The long-term national-accounts data for up to 36 countries provide a large sample of disaster events of magnitude 10% or more. For this sample, a power-law density provides a good fit to the distribution of the ratio of normal to disaster consumption or GDP. The key parameter of the size distribution is the upper-tail exponent, alpha, estimated to be near 5, with a 95% confidence interval between 3-1/2 and 7. The equity premium involves a race between alpha and the coefficient of relative risk aversion, gamma. A higher alpha signifies a thinner tail and, therefore, a lower equity premium, whereas a higher gamma implies a higher equity premium. The equity premium is finite if (alpha-1>gamma). To accord with an observed average unlevered equity premium of around 5%, we get a point estimate for gamma close to 3, with a 95% confidence interval of roughly 2 to 4.
| Author | : Robert J. Barro |
| Publisher | : |
| Total Pages | : 39 |
| Release | : 2009 |
| Genre | : Disasters |
| ISBN | : |
Download On the Size Distribution of Macroeconomic Disasters Book in PDF, ePub and Kindle
In the rare-disasters setting, a key determinant of the equity premium is the size distribution of macroeconomic disasters, gauged by proportionate declines in per capita consumption or GDP. The long-term national-accounts data for up to 36 countries provide a large sample of disaster events of magnitude 10% or more. For this sample, a power-law density provides a good fit to the distribution of the ratio of normal to disaster consumption or GDP. The key parameter of the size distribution is the upper-tail exponent, alpha, estimated to be near 5, with a 95% confidence interval between 3-1/2 and 7. The equity premium involves a race between alpha and the coefficient of relative risk aversion, gamma. A higher alpha signifies a thinner tail and, therefore, a lower equity premium, whereas a higher gamma implies a higher equity premium. The equity premium is finite if (alpha-1>gamma). To accord with an observed average unlevered equity premium of around 5%, we get a point estimate for gamma close to 3, with a 95% confidence interval of roughly 2 to 4.
| Author | : Nicole Branger |
| Publisher | : |
| Total Pages | : |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
Download The Dynamics of Crises and the Equity Premium Book in PDF, ePub and Kindle
| Author | : John H. Cochrane |
| Publisher | : Now Publishers Inc |
| Total Pages | : 117 |
| Release | : 2005 |
| Genre | : Business & Economics |
| ISBN | : 1933019158 |
Download Financial Markets and the Real Economy Book in PDF, ePub and Kindle
Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
| Author | : Xavier Gabaix |
| Publisher | : |
| Total Pages | : 44 |
| Release | : 2008 |
| Genre | : Assets (Accounting) |
| ISBN | : |
Download Variable Rare Disasters Book in PDF, ePub and Kindle
This paper incorporates a time-varying intensity of disasters in the Rietz-Barro hypothesis that risk premia result from the possibility of rare, large disasters. During a disaster, an asset's fundamental value falls by a time-varying amount. This in turn generates time-varying risk premia and thus volatile asset prices and return predictability. Using the recent technique of linearity-generating processes (Gabaix 2007), the model is tractable, and all prices are exactly solved in closed form. In the "variable rare disasters" framework, the following empirical regularities can be understood qualitatively: (i) equity premium puzzle (ii) risk-free rate-puzzle (iii) excess volatility puzzle (iv) predictability of aggregate stock market returns with price-dividend ratios (v) value premium (vi) often greater explanatory power of characteristics than covariances for asset returns (vii) upward sloping nominal yield curve (viiii) a steep yield curve predicts high bond excess returns and a fall in long term rates (ix) corporate bond spread puzzle (x) high price of deep out-of-the-money puts. I also provide a calibration in which those puzzles can be understood quantitatively as well. The fear of disaster can be interpreted literally, or can be viewed as a tractable way to model time-varying risk-aversion or investor sentiment.
| Author | : Leonard C. MacLean |
| Publisher | : World Scientific |
| Total Pages | : 941 |
| Release | : 2013 |
| Genre | : Business & Economics |
| ISBN | : 9814417351 |
Download Handbook of the Fundamentals of Financial Decision Making Book in PDF, ePub and Kindle
This handbook in two parts covers key topics of the theory of financial decision making. Some of the papers discuss real applications or case studies as well. There are a number of new papers that have never been published before especially in Part II.Part I is concerned with Decision Making Under Uncertainty. This includes subsections on Arbitrage, Utility Theory, Risk Aversion and Static Portfolio Theory, and Stochastic Dominance. Part II is concerned with Dynamic Modeling that is the transition for static decision making to multiperiod decision making. The analysis starts with Risk Measures and then discusses Dynamic Portfolio Theory, Tactical Asset Allocation and Asset-Liability Management Using Utility and Goal Based Consumption-Investment Decision Models.A comprehensive set of problems both computational and review and mind expanding with many unsolved problems are in an accompanying problems book. The handbook plus the book of problems form a very strong set of materials for PhD and Masters courses both as the main or as supplementary text in finance theory, financial decision making and portfolio theory. For researchers, it is a valuable resource being an up to date treatment of topics in the classic books on these topics by Johnathan Ingersoll in 1988, and William Ziemba and Raymond Vickson in 1975 (updated 2 nd edition published in 2006).
