Is the market price of risk infinite?

Timothy Cogley ()

Economics Letters, 2009, vol. 102, issue 1, 13-16

Abstract: In a Bayesian model, a rational-expectations Euler equation involves a learning wedge that disconnects the consumer's IMRS from the rational-expectations pricing kernel. The wedge is extremely volatile and explains the high volatility of the rational-expectations pricing kernel.

Keywords: Market; price; of; risk; Hansen-Jagannathan; bound; Learning; Wedges (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (3)

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