EconPapers    
Economics at your fingertips  
 

Risk Premia in General Equilibrium

Olaf Posch ()

No 3131, CESifo Working Paper Series from CESifo

Abstract: This paper shows that non-linearities imposed by a neoclassical production function alone can generate time-varying and asymmetric risk premia over the business cycle. These (empirical) key features become relevant, and asset market implications improve substantially when we allow for non-normalities in the form of rare disasters. We employ analytical solutions of dynamic stochastic general equilibrium models, including a novel solution with endogenous labor supply, to obtain closed-form expressions for the risk premium in production economies. In contrast to endowment economies, the curvature of the policy functions affects the risk premium through controlling the individual’s effective risk aversion.

Keywords: risk premium; continuous-time DSGE (search for similar items in EconPapers)
JEL-codes: E21 G12 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://www.cesifo.org/DocDL/cesifo1_wp3131.pdf (application/pdf)

Related works:
Journal Article: Risk premia in general equilibrium (2011) Downloads
Working Paper: Risk premia in general equilibrium (2011) Downloads
Working Paper: Risk premia in general equilibrium (2009) Downloads
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:ces:ceswps:_3131

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().

 
Page updated 2023-02-02
Handle: RePEc:ces:ceswps:_3131