Rare Macroeconomic Disasters PDF Download
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| 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 | : |
| 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 | : José F. Ursúa |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2023 |
| Genre | : |
| ISBN | : |
Download Rare Macroeconomic Disasters and Lost Decades in Latin America 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 | : 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 | : Emil Siriwardane |
| Publisher | : |
| Total Pages | : 80 |
| Release | : 2015 |
| Genre | : Finance |
| ISBN | : |
Download The Probability of Rare Disasters Book in PDF, ePub and Kindle
I analyze a rare disasters economy that yields a measure of the risk neutral probability of a macroeconomic disaster, p*t. A large panel of options data provides strong evidence that p*t is the single factor driving option-implied jump risk measures in the cross section of firms. This is a core assumption of the rare disasters paradigm. A number of empirical patterns further support the interpretation of p*t as the risk-neutral likelihood of a disaster. First, standard forecasting regressions reveal that increases in p*t lead to economic downturns. Second, disaster risk is priced in the cross section of U.S. equity returns. A zero-cost equity portfolio with exposure to disasters earns risk-adjusted returns of 7.6% per year. Finally, a calibrated version of the model reasonably matches the (i) sensitivity of the aggregate stock market to changes in the likelihood of a disaster and (ii) loss rates of disaster risky stocks during the 2008 financial crisis.
| 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 | : Debarati Guha-Sapir |
| Publisher | : Oxford University Press |
| Total Pages | : 341 |
| Release | : 2013-05-23 |
| Genre | : Business & Economics |
| ISBN | : 0199841934 |
Download The Economic Impacts of Natural Disasters Book in PDF, ePub and Kindle
This work combines research and empirical evidence on the economic costs of disasters with theoretical approaches. It provides new insights on how to assess and manage the costs and impacts of disaster prevention, mitigation, recovery and adaption, and much more.
| Author | : Michael J. Oliver |
| Publisher | : Edward Elgar Publishing |
| Total Pages | : 382 |
| Release | : 2007-01-01 |
| Genre | : History |
| ISBN | : 9781847205490 |
Download Economic Disasters of the Twentieth Century Book in PDF, ePub and Kindle
The First and Second World Wars, the great depression, oil shocks, inflation, financial crises, stock market crashes, the collapse of the Soviet command economy and Third World disasters are discussed in this comprehensive book. The contributors subject these disasters to in-depth assessment, carefully considering their costs and impact on specific countries and regions, as well as assessing them in a global context. The book examines the legacy of economic disasters and asks whether economic disasters are avoidable or whether policymakers can learn from their mistakes.
| Author | : Hui Chen |
| Publisher | : |
| Total Pages | : 50 |
| Release | : 2010 |
| Genre | : Disaster insurance |
| ISBN | : |
Download Rare Disasters and Risk Sharing with Heterogeneous Beliefs Book in PDF, ePub and Kindle
Although the threat of rare economic disasters can have large effect on asset prices, difficulty in inference regarding both their likelihood and severity provides the potential for disagreements among investors. Such disagreements lead investors to insure each other against the types of disasters each one fears the most. Due to the highly nonlinear relationship between consumption losses in a disaster and the risk premium, a small amount of risk sharing can significantly attenuate the effect that disaster risk has on the equity premium. We characterize the sensitivity of risk premium to wealth distribution analytically. Our model shows that time variation in the wealth distribution and the amount of disagreement across agents can both lead to significant variation in disaster risk premium. It also highlights the conditions under which disaster risk premium will be large, namely when disagreement across agents is small or when the wealth distribution is highly concentrated in agents fearful of disasters. Finally, the model predicts an inverse U-shaped relationship between the equity premium and the size of the disaster insurance market -- National Bureau of Economic Research web site.
