Consumption, the persistence of shocks, and asset price volatility

• 成果类型: Article
• 署名作者: Carlos Rodriguez, Juan
• 署名单位: Tilburg University
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2006.06.001
• 发表日期: 2006
• 页码: 1471-1490
• 关键词: equity premium; volatility; transitory shocks

摘要

In a general equilibrium setting, a temporary component in consumption introduces a wedge between the volatility of equity returns and the volatility of consumption growth. This paper explores the asset pricing consequences of this property in a model in which consumption is the sum of a permanent and a transitory component. Permanent shocks are assumed to be rare events, while transitory shocks follow a diffusion process. When calibrated to US annual data, the model matches first and second moments of equity and bond returns for preference parameters within acceptable bounds ' Permanent and transitory shocks together explain the equity premium, while transitory shocks alone explain the excess volatility of returns. (c) 2006 Elsevier B.V. All rights reserved.