Can time-varying risk of rare disasters explain aggregate stock market volatility?

Jessica Wachter ()

No 944, 2008 Meeting Papers from Society for Economic Dynamics

Abstract: not allow the probabilities of rare disasters to vary over time. Rather, Gabaix assumes that the degree of the response of dividends to a consumption disaster varies over time; it is this variability that drives volatility in his model. This sharply contrasts with the driving force of stock market volatility in this paper: the changing risk of a rare disaster.

Date: 2008
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Related works:
Journal Article: Can Time-Varying Risk of Rare Disasters Explain Aggregate Stock Market Volatility? (2013)
Working Paper: Can Time-Varying Risk of Rare Disasters Explain Aggregate Stock Market Volatility? (2008)
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