Accuracy of stochastic perturbuation methods: the case of asset pricing models
Fabrice Collard () and
Michel Juillard ()
CEPREMAP Working Papers (Couverture Orange) from CEPREMAP
This paper investigates the accuracy of a perturbation method in approximating the solution to stochastic equilibrium models under rational expectations. As a benchmark model, we use a version of asset pricing models proposed by Burnside  which admits a closed-form solution while not making the assumptions of certainty equivalence. We then check the accuracy of perturbation methods -extended to a stochastic environment- against the closed form solution. Second an especially fourth order expansions are then found to be more efficient than standard linear approximation, as they are able to account for higher order moments of the distribution.
JEL-codes: C63 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-fmk
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Journal Article: Accuracy of stochastic perturbation methods: The case of asset pricing models (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cpm:cepmap:9922
Access Statistics for this paper
More papers in CEPREMAP Working Papers (Couverture Orange) from CEPREMAP Contact information at EDIRC.
Bibliographic data for series maintained by Stéphane Adjemian ().