Equilibrium asset pricing in directed networks
Christoph Meinerding and
No 37/2018, Discussion Papers from Deutsche Bundesbank
Directed links in cash flow networks affect the cross-section of price exposures and market prices of risk in equilibrium. In an asset pricing model featuring mutually exciting jumps, we measure directedness through an asset's shock propagation capacity (spc). In the model, we prove: (i) Cash flow shocks of high spc assets command high market prices of risk, (ii) the price reaction of an asset to its own cash flow shocks is less pronounced for high spc assets. To illustrate our theoretical findings, we estimate an empirical network from industry cash flows and find support for these predictions.
Keywords: directed cash flow networks; directed shocks; mutually exciting processes; recursive preferences (search for similar items in EconPapers)
JEL-codes: G01 G12 D85 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdps:372018
Access Statistics for this paper
More papers in Discussion Papers from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().