EconPapers    
Economics at your fingertips  
 

The Size of the Permanent Component of Asset Pricing Kernels

Fernando Alvarez and Urban Jermann ()

Working Papers from University of Pennsylvania, Wharton School, Weiss Center

Abstract: We derive a lower bound for the size of the permanent component of 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 large; its volatility is about the same as the volatility of the stochastic discount factor. We also show that, for many cases where the pricing kernel is a function of consumption, innovations to consumption need to have permanent effects.

Date: 2001-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://knowledge.wharton.upenn.edu/wp-content/uploads/2013/09/12161.pdf

Related works:
Working Paper: The Size of the Permanent Component of Asset Pricing Kernels (2001) 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:ecl:upafin:01-4

Access Statistics for this paper

More papers in Working Papers from University of Pennsylvania, Wharton School, Weiss Center Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-09-16
Handle: RePEc:ecl:upafin:01-4