Asset pricing in production economies with extrapolative expectations

• 成果类型: Article
• 署名作者: Hirshleifer, David; Li, Jun; Yu, Jianfeng
• 署名单位: University of California System; University of California Irvine; University of Texas System; University of Texas Dallas; University of Minnesota System; University of Minnesota Twin Cities; The Chinese University of Hong Kong, Shenzhen
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2015.08.006
• 发表日期: 2015
• 页码: 87-106
• 关键词: extrapolation; Production-based model; Long-run risk; recursive preferences

摘要

Introducing extrapolative bias into a standard production-based model with recursive preferences reconciles salient stylized facts about business cycles (low consumption volatility, high investment volatility relative to output) and financial markets (high equity premium, volatile stock returns, low and smooth risk-free rate) with plausible levels of risk aversion and intertemporal elasticity of substitution. Furthermore, the model captures return predictability based upon dividend yield, Q, and investment. Intuitively, extrapolative bias increases the variation in the wealth-consumption ratio, which is heavily priced under recursive preferences; adjustment costs decrease the covariance between marginal utility and asset returns. Empirical support for key implications of the model is also provided. (C) 2015 Elsevier B.V. All rights reserved.