Growth uncertainty, generalized disappointment aversion and production-based asset pricing

• 成果类型: Article
• 署名作者: Liu, Hening; Miao, Jianjun
• 署名单位: University of Manchester; Boston University; Central University of Finance & Economics; Zhejiang University
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2014.12.002
• 发表日期: 2015
• 页码: 70-89
• 关键词: equity premium; asset pricing; business cycles; disappointment aversion; Volatility risk; DSGE model; Markov switching

摘要

We study a production economy with regime switching in the conditional mean and volatility of productivity growth. The representative agent has generalized disappointment aversion (GDA) preferences. We show that volatility risk in productivity growth carries a positive and sizable risk premium in levered equity. Our model can endogenously generate long-run risks in the volatility of consumption growth observed in the data. We show that introducing leverage with a procyclical dividend process consistent with the data is critical for the GDA preferences to have a large impact on equity returns. (C) 2014 Elsevier B.V. All rights reserved.