Risk Price Dynamics

Jaroslav Borovička, Lars Hansen, Mark Hendricks and Jose Scheinkman

No 15506, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We present a novel approach to depicting asset pricing dynamics by characterizing shock exposures and prices for alternative investment horizons. We quantify the shock exposures in terms of elasticities that measure the impact of a current shock on future cash-flow growth. The elasticities are designed to accommodate nonlinearities in the stochastic evolution modeled as a Markov process. Stochastic growth in the underlying macroeconomy and stochastic discounting in the representation of asset values are central ingredients in our investigation. We provide elasticity calculations in a series of examples featuring consumption externalities, recursive utility, and jump risk.

JEL-codes: C52 E44 G12 (search for similar items in EconPapers)
Date: 2009-11
New Economics Papers: this item is included in nep-bec, nep-cba and nep-dge
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Citations: View citations in EconPapers (7)

Published as Jaroslav Borovička & Mark Hendricks & José A. Scheinkman, 2011. "Risk-Price Dynamics," Journal of Financial Econometrics, Oxford University Press, vol. 9(1), pages 3-65, Winter.

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Related works:
Journal Article: Risk-Price Dynamics (2011)
Working Paper: Risk Price Dynamics (2009)
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