Disaster risk and asset returns: An international perspective

• 成果类型: Article; Proceedings Paper
• 署名作者: Lewis, Karen K.; Liu, Edith X.
• 署名单位: University of Pennsylvania; National Bureau of Economic Research; Federal Reserve System - USA; Federal Reserve System Board of Governors
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2017.03.001
• 发表日期: 2017
• 页码: S42-S58
• 关键词: Disaster risk effects; Asset return moments; International macro correlation

摘要

Recent studies have shown that disaster risk can generate asset return moments similar to those observed in the U.S. data. However, these studies have ignored the cross-country asset pricing implications of the disaster risk model. This paper shows that standard U.S.-based disaster risk model assumptions found in the literature lead to counterfactual international asset pricing implications. Given consumption pricing moments, disaster risk from this literature cannot explain the range of equity premia and government bill rates. Furthermore, the independence of disasters presumed in some studies generates counterfactually low cross-country correlations in equity markets. Alternatively, if disasters are all shared, the model generates correlations that are excessively high. We show that common and idiosyncratic components of disaster risk are needed to explain the pattern in consumption and equity co-movements. 2017 The Authors. Published by Elsevier B.V.