Economics at your fingertips  

Sources of entropy in representative agent models of asset pricing

Stanley Zin, Mikhail Chernov () and David Backus

No 476, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: We use asset returns to characterize the properties of the pricing kernel, including its volatility (measured by entropy) and time-dependence. Then we explore similar properties of a number of popular representative agent models: long-run risk, time-varying volatility and risk, several versions of habits, and jumps (interpreted here as departures from conditional lognormality). Using common loglinear approximations, we show analytically how each of these models generates entropy and time-dependence and comment on their ability to reproduce some of the salient features of asset returns. We think the exercise clarifies the mechanisms behind these models and reveals their similarities and differences.

Date: 2010
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
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:

Access Statistics for this paper

More papers in 2010 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

Page updated 2019-09-11
Handle: RePEc:red:sed010:476