How Risky Is Consumption in the Long-Run? Benchmark Estimates from a Robust Estimator

• 成果类型: Review
• 署名作者: Dew-Becker, Ian
• 署名单位: Northwestern University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhw015
• 发表日期: 2017
• 页码: 631
• 关键词: rare disasters; asset returns; heteroskedasticity; permanent; prices; habit; components; MODEL; GNP

摘要

The long-run standard deviation (LRSD) of consumption growth is a key moment in determining risk premiums under Epstein-Zin preferences. Standard estimators of the LRSD are biased downward and have poor confidence interval coverage, making them overreject the long-run risk model. This paper studies a new estimator with smaller bias and accurate confidence intervals. Standard long-run risk calibrations are still rejected in the data. The LRSD of consumption growth in the postwar sample is estimated to be 2.5% per year with an upper bound to the 95% confidence interval of 4.9%. These values can be taken as benchmarks for future calibrations.