Learning with rare disasters

• 成果类型: Article
• 署名作者: Wachter, Jessica A.; Zhu, Yicheng
• 署名单位: University of Pennsylvania
• 刊物名称: QUANTITATIVE ECONOMICS
• ISSN/ISSBN: 1759-7323
• DOI: 10.3982/QE1716
• 发表日期: 2025
• 关键词: subjective expectations; rational-expectations; RISK; MODEL; consumption; volatility; crises; equilibrium; returns; MARKETS

摘要

Financial crises appear to have long-lasting effects, even after the crisis itself has passed. This paper offers a simple explanation based on Bayesian learning from rare events. Agents face a latent and time-varying probability of economic disaster. When a disaster occurs, learning results in greater effects on asset prices because agents update their probability of future disasters. Moreover, agents' belief that the disaster risk is high can rationally persist for years, even when it is in fact low. We generalize the model to allow for a noisy signal of the disaster probability. This generalized model explains excess stock market volatility together with negative skewness, effects that previous models in the literature struggle to explain.