Risk premia in general equilibrium

Olaf Posch

Post-Print from HAL

Abstract: This paper shows that non-linearities from a neoclassical production function alone can generate time-varying, asymmetric risk premia and predictability over the business cycle. These empirical key features become relevant 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 an endowment economy with constant investment opportunities, the curvature of the consumption function affects the risk premium in production economies through controlling the individual's effective risk aversion.

Keywords: E21; G12; Risk premium; Continuous-time DSGE; Effective risk aversion (search for similar items in EconPapers)
Date: 2011-08-19
Note: View the original document on HAL open archive server: https://hal.science/hal-00851860
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Published in Journal of Economic Dynamics and Control, 2011, 35 (9), pp.1557. ⟨10.1016/j.jedc.2010.12.017⟩

Downloads: (external link)
https://hal.science/hal-00851860/document (application/pdf)

Related works:
Journal Article: Risk premia in general equilibrium (2011)
Working Paper: Risk Premia in General Equilibrium (2010)
Working Paper: Risk premia in general equilibrium (2009)
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:hal:journl:hal-00851860

DOI: 10.1016/j.jedc.2010.12.017

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().