Parameter learning in production economies

• 成果类型: Article
• 署名作者: Babiak, Mykola; Kozhan, Roman
• 署名单位: Lancaster University; University of Warwick
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2024.103555
• 发表日期: 2024
• 关键词: Parameter learning; Dividend yield variance decomposition; Return predictability; business cycles; Markov switching

摘要

We examine how parameter learning amplifies the impact of macroeconomic shocks on equity prices and quantities in a standard production economy where a representative agent has Epstein-Zin preferences. An investor observes technology shocks that follow a regime-switching process but does not know the underlying model parameters governing the short -term and long-run perspectives of economic growth. We show that rational belief updating endogenously generates long-run risks that help explain various asset pricing facts, most prominently, dividend yield variance decomposition. The asset pricing implications of endogenous long-run risks depend crucially on the introduction of a procyclical dividend process.