On User Costs of Risky Monetary Assets

William Barnett and Shu Wu

Macroeconomics from University Library of Munich, Germany

Abstract: We extend the monetary-asset user-cost risk adjustment of Barnett, Liu, and Jensen (1997) and their risk-adjusted Divisia monetary aggregates to the case of multiple non-monetary assets and intertemporal non- separability. Our model can generate potentially larger and more accurate CCAPM user-cost risk adjustments than those found in Barnett, Liu, and Jensen (1997). We show that the risk adjustment to a monetary asset’s user cost can be measured easily by its beta. We show that any risky non-monetary asset can be used as the benchmark asset, if its rate of return is adjusted in accordance with our formula. These extensions could be especially useful, when own rates of return are subject to exchange rate risk, as in Barnett (2003).

Keywords: User costs; monetary aggregation; risk; intertemporal nonseparability; CCAPM; equity premium puzzle; Divisia monetary aggregates (search for similar items in EconPapers)
JEL-codes: C22 C43 E41 G12 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2004-06-24
New Economics Papers: this item is included in nep-ifn, nep-mac, nep-mon and nep-rmg
Note: Type of Document - pdf; pages: 26. This paper is forthcoming in volume 1, number 1, of the new journal, the Annals of Finance.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0406/0406009.pdf (application/pdf)

Related works:
Chapter: On User Costs of Risky Monetary Assets (2011)
Journal Article: On user costs of risky monetary assets (2005)
Working Paper: On user costs of risy monetary assets (2004)
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:wpa:wuwpma:0406009

Access Statistics for this paper

More papers in Macroeconomics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).