How Much Would You Pay to Resolve Long-Run Risk?

Larry Epstein, Emmanuel Farhi and Tomasz Strzalecki

No 19541, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Though risk aversion and the elasticity of intertemporal substitution have been the subjects of careful scrutiny when calibrating preferences, the long-run risks literature as well as the broader literature using recursive utility to address asset pricing puzzles have ignored the full implications of their parameter specifications. Recursive utility implies that the temporal resolution of risk matters and a quantitative assessment of how much it matters should be part of the calibration process. This paper gives a sense of the magnitudes of implied timing premia. Its objective is to inject temporal resolution of risk into the discussion of the quantitative properties of long-run risks and related models.

JEL-codes: E0 G0 (search for similar items in EconPapers)
Date: 2013-10
New Economics Papers: this item is included in nep-mac and nep-upt
Note: AP EFG IFM
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Citations: View citations in EconPapers (1)

Published as Larry G. Epstein & Emmanuel Farhi & Tomasz Strzalecki, 2014. "How Much Would You Pay to Resolve Long-Run Risk?," American Economic Review, American Economic Association, American Economic Association, vol. 104(9), pages 2680-97, September.

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Related works:
Journal Article: How Much Would You Pay to Resolve Long-Run Risk? (2014)
Working Paper: How Much Would You Pay to Resolve Long-Run Risk? (2014)
Working Paper: How much would you pay to resolve long-run risk? (2014)
Working Paper: How Much Would You Pay to Resolve Long-Run Risk? (2013)
Working Paper: How Much Would You Pay to Resolve Long-Run Risk? (2013)
Working Paper: How Much Would You Pay To Resolve Long-Run Risk?
Working Paper: How Much Would You Pay to Resolve Long-Run Risk?
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