Robustness and pricing with uncertain growth

• 成果类型: Article
• 署名作者: Cagetti, M; Hansen, LP; Sargent, T; Williams, N
• 署名单位: University of Chicago; University of Virginia; Stanford University; Princeton University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/15.2.363
• 发表日期: 2002
• 页码: 363
• 关键词: RISK-SENSITIVE CONTROL; time-series; STOCHASTIC CONSUMPTION; returns; income; games; MODEL

摘要

We study how decision-makers' concerns about robustness affect prices and quantities in a stochastic growth model. In the model economy, growth rates in technology are altered by infrequent large shocks and continuous small shocks. An investor observes movements in the technology level but cannot perfectly distinguish their sources. Instead the investor solves a signal extraction problem. We depart from most of the macroeconomics and finance literature by presuming that the investor treats the specification of technology evolution as an approximation. To promote a decision rule that is robust to model misspecification. an investor acts as if a malevolent player threatens to perturb the actual data-generating process relative to his approximating model. We study how a concern about robustness alters asset prices. We show that the dynamic evolution of the risk-return trade-off is dominated by movements in the growth-state probabilities and that the evolution of the dividend-price ratio is driven primarily by the capital-technology ratio.