Risk, Uncertainty and Asset Prices
Geert Bekaert (),
Eric Engstrom () and
No 12248, NBER Working Papers from National Bureau of Economic Research, Inc
We identify the relative importance of changes in the conditional variance of fundamentals (which we call %u201Cuncertainty%u201D) and changes in risk aversion (%u201Crisk%u201D for short) in the determination of the term structure, equity prices and risk premiums. Theoretically, we introduce persistent time-varying uncertainty about the fundamentals in an external habit model. The model matches the dynamics of dividend and consumption growth, including their volatility dynamics and many salient asset market phenomena. While the variation in dividend yields and the equity risk premium is primarily driven by risk, uncertainty plays a large role in the term structure and is the driver of counter-cyclical volatility of asset returns.
JEL-codes: G12 G15 E44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin, nep-fmk, nep-mac and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Published as Bekaert, Geert & Engstrom, Eric & Xing, Yuhang, 2009. "Risk, uncertainty, and asset prices," Journal of Financial Economics, Elsevier, vol. 91(1), pages 59-82, January.
Downloads: (external link)
Journal Article: Risk, uncertainty, and asset prices (2009)
Working Paper: Risk, Uncertainty and Asset Prices (2006)
Working Paper: Risk, uncertainty, and asset prices (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:nbr:nberwo:12248
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Series data maintained by ().