EconPapers    
Economics at your fingertips  
 

Using Asset Prices to Measure the Persistence of the Marginal Utility of Wealth

Fernando Alvarez and Urban Jermann ()

Econometrica, 2005, vol. 73, issue 6, 1977-2016

Abstract: We derive a lower bound for the volatility of the permanent component of investors' marginal utility of wealth or, more generally, asset pricing kernels. The bound is based on return properties of long-term zero-coupon bonds, risk-free bonds, and other risky securities. We find the permanent component of the pricing kernel to be very volatile; its volatility is about at least as large as the volatility of the stochastic discount factor. A related measure for the transitory component suggest it to be considerably less important. We also show that, for many cases where the pricing kernel is a function of consumption, innovations to consumption need to have permanent effects. Copyright The Econometric Society 2005.

Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (88) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1111/j.1468-0262.2005.00643.x link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
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:ecm:emetrp:v:73:y:2005:i:6:p:1977-2016

Ordering information: This journal article can be ordered from
https://www.economet ... ordering-back-issues

Access Statistics for this article

Econometrica is currently edited by Guido Imbens

More articles in Econometrica from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2020-09-10
Handle: RePEc:ecm:emetrp:v:73:y:2005:i:6:p:1977-2016