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Evaluating Asset Pricing Models with Limited Commitment Using Household Consumption Data

Dirk Krueger
4.9/5 (34524 ratings)
Read Now Download Now ⏭ listen AudioBook
Description:We evaluate the asset pricing implications of a class of models in which risk sharing is imperfect because of limited enforcement of intertemporal contracts. Lustig (2004) has shown that in such a model the asset pricing kernel can be written as a simple function of the aggregate consumption growth rate and the growth rate of consumption of the set of households that do not face binding enforcement constraints. These unconstrained households have lower consumption growth rates than all other households in the economy. We use household data on consumption growth from the U.S. Consumer Expenditure Survey to identify unconstrained households, to estimate the pricing kernel implied by these models and evaluate their performance in pricing aggregate risk. We find that for high values of the relative risk aversion coefficient, the limited enforcement pricing kernel generates a market price of risk that is substantially closer to the data than the one obtained using the standard complete markets asset pricing kernel.We have made it easy for you to find a PDF Ebooks without any digging. And by having access to our ebooks online or by storing it on your computer, you have convenient answers with Evaluating Asset Pricing Models with Limited Commitment Using Household Consumption Data. To get started finding Evaluating Asset Pricing Models with Limited Commitment Using Household Consumption Data, you are right to find our website which has a comprehensive collection of manuals listed.
Our library is the biggest of these that have literally hundreds of thousands of different products represented.
Pages
28
Format
PDF, EPUB & Kindle Edition
Publisher
—
Release
2007
ISBN
wR7WAAAAMAAJ

Evaluating Asset Pricing Models with Limited Commitment Using Household Consumption Data

Dirk Krueger
4.4/5 (1290744 ratings)
Read Now Download now ⏭ listen AudioBook
Description: We evaluate the asset pricing implications of a class of models in which risk sharing is imperfect because of limited enforcement of intertemporal contracts. Lustig (2004) has shown that in such a model the asset pricing kernel can be written as a simple function of the aggregate consumption growth rate and the growth rate of consumption of the set of households that do not face binding enforcement constraints. These unconstrained households have lower consumption growth rates than all other households in the economy. We use household data on consumption growth from the U.S. Consumer Expenditure Survey to identify unconstrained households, to estimate the pricing kernel implied by these models and evaluate their performance in pricing aggregate risk. We find that for high values of the relative risk aversion coefficient, the limited enforcement pricing kernel generates a market price of risk that is substantially closer to the data than the one obtained using the standard complete markets asset pricing kernel.We have made it easy for you to find a PDF Ebooks without any digging. And by having access to our ebooks online or by storing it on your computer, you have convenient answers with Evaluating Asset Pricing Models with Limited Commitment Using Household Consumption Data. To get started finding Evaluating Asset Pricing Models with Limited Commitment Using Household Consumption Data, you are right to find our website which has a comprehensive collection of manuals listed.
Our library is the biggest of these that have literally hundreds of thousands of different products represented.
Pages
28
Format
PDF, EPUB & Kindle Edition
Publisher
—
Release
2007
ISBN
wR7WAAAAMAAJ

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