Financial Uncertainty with Ambiguity and Learning

• 成果类型: Article
• 署名作者: Liu, Hening; Zhang, Yuzhao
• 署名单位: University of Manchester; Alliance Manchester Business School; Rutgers University System; Rutgers University Newark; Rutgers University New Brunswick
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.3958
• 发表日期: 2022
• 页码: 2120-2140
• 关键词: Ambiguity; business cycle; Markov switching; Production-based asset pricing; uncertainty; Variance risk premium

摘要

We examine a production-based asset pricing model with regime-switching productivity growth, learning, and ambiguity. Both the mean and volatility of the growth rate of productivity are assumed to follow a Markov chain with an unobservable state. The agent's preferences are characterized by the generalized recursive smooth ambiguity utility function. Our calibrated benchmark model with modest risk aversion can match moments of the variance risk premium in the data and reconcile empirical relations between the risk neutral variance and macroeconomic quantities and their respective volatilities. We show that the interplay between productivity volatility risk and ambiguity aversion is important for pricing variance risk in returns.