EconPapers    
Economics at your fingertips  
 

ASSET PRICING AND THE ROLE OF MACROECONOMIC VOLATILITY

Stefano d'Addona () and Christos Giannikos ()

No 711, Working Papers from CREI Università degli Studi Roma Tre

Abstract: Standard Real Business Cycle (RBC) models are well known to generate counter-factual asset pricing implications. This paper provides a simple extension to the prior literature where we study an economy that follows a regimes switching process both in the mean and the volatility, in conjunction with Epstein-Zin preferences for the consumers. We provide a detailed theoretical and numerical analysis of the model's predictions. We also show that a reasonable parameterization of our model conveys reasonable financial figures. Furthermore, we provide evidence in support of the necessity to model the decline of macroeconomic risk in this particular class of models.

Keywords: Asset Pricing; Real Business Cycle Models; Recursive Preferences; Markov Switching Models (search for similar items in EconPapers)
JEL-codes: G12 E32 E23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dge, nep-for and nep-mac
Date: 2011, Revised 2011
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://host.uniroma3.it/centri/crei/pubblicazioni/ ... 011/CREI_07_2011.pdf First version, 2011 (application/pdf)

Related works:
Journal Article: Asset pricing and the role of macroeconomic volatility (2014) 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:rcr:wpaper:07_11

Access Statistics for this paper

More papers in Working Papers from CREI Università degli Studi Roma Tre Contact information at EDIRC.
Bibliographic data for series maintained by Francesca Vaino ().

 
Page updated 2018-09-17
Handle: RePEc:rcr:wpaper:07_11