Measuring macroeconomic tail risk

Roberto Marfè and Julien Penasse

Journal of Financial Economics, 2024, vol. 156, issue C

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 flexible approach does not require asset price information and can thus serve as a benchmark to evaluate the empirical validity of rare disaster 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)
JEL-codes: E44 G12 G17 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X24000618
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Measuring Macroeconomic Tail Risk (2024)
Working Paper: Measuring Macroeconomic Tail Risk (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:156:y:2024:i:c:s0304405x24000618

DOI: 10.1016/j.jfineco.2024.103838

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().