Measuring Macroeconomic Tail Risk

Roberto Marfe and Julien Penasse

Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: This paper estimates consumption and GDP tail risk dynamics over the long run (1900{ 2020). Our predictive approach circumvents the scarcity of large macroeconomic crises by exploiting a rich information set covering 42 countries. This exible approach does not require asset price information and can thus serve as a benchmark to evaluate the empirical validity of rare disasters models. Our estimates covary with asset prices and forecast future stock returns, in line with theory. A calibration disciplined by our estimates supports the prediction that macroeconomic tail risk drives the equity premium.

Keywords: rare disasters; equity premium; return predictability (search for similar items in EconPapers)
Pages: 104 pages
Date: 2024
New Economics Papers: this item is included in nep-fdg and nep-rmg
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Measuring macroeconomic tail risk (2024)
Working Paper: Measuring Macroeconomic Tail Risk (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:cca:wpaper:715

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