Ambiguity Aversion and Asset Prices in Production Economies PDF Download
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Author: Mohammad R. Jahan-Parvar
Publisher:
ISBN:
Category :
Languages : en
Pages : 47
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Book Description
We examine a production-based asset pricing model with an unobservable mean growth rate ollowing a two-state Markov chain and with an ambiguity averse representative agent. Our model requires a low coefficient of relative risk aversion to produce: (i) a high equity premium and volatile equity returns, (ii) a low and smooth risk-free rate, (iii) smooth consumption growth and volatile nvestment growth, (iv) countercyclical equity premium and market price of risk, (v) conditional heteroscedasticity in returns, and (vi) long-horizon predictability of excess returns.
Author: Mohammad R. Jahan-Parvar
Publisher:
ISBN:
Category :
Languages : en
Pages : 47
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Book Description
We examine a production-based asset pricing model with an unobservable mean growth rate ollowing a two-state Markov chain and with an ambiguity averse representative agent. Our model requires a low coefficient of relative risk aversion to produce: (i) a high equity premium and volatile equity returns, (ii) a low and smooth risk-free rate, (iii) smooth consumption growth and volatile nvestment growth, (iv) countercyclical equity premium and market price of risk, (v) conditional heteroscedasticity in returns, and (vi) long-horizon predictability of excess returns.
Author: Larry G. Epstein
Publisher:
ISBN:
Category : Ambiguity
Languages : en
Pages : 51
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Book Description
The Ellsberg paradox suggests that people behave differently in risky situations -- when they are given objective probabilities -- than in ambiguous situations when they are not told the odds (as is typical in financial markets). Such behavior is inconsistent with subjective expected utility theory (SEU), the standard model of choice under uncertainty in financial economics. This article reviews models of ambiguity aversion. It shows that such models -- in particular, the multiple-priors model of Gilboa and Schmeidler -- have implications for portfolio choice and asset pricing that are very different from those of SEU and that help to explain otherwise puzzling features of the data -- National Bureau of Economic Research web site.
Author: Maximilian Alexander Mihm
Publisher:
ISBN:
Category :
Languages : en
Pages : 159
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Book Description
This dissertation contributes to the growing literature in economics on ambiguity aversion. I identify an implicit reference-point assumption in the multiple priors model of Gilboa and Schmeidler (1989), generalize their decision theory to allow for stochastic reference-points, and study the market implications of endowment-dependent ambiguity aversion. Chapter 2 identifies the implicit reference-point assumption in the multiple priors model and provides an axiomatic characterization of a reference-dependent multiple priors model. I also provide an axiomatic characterization of a reference-dependent version of the Choquet Expected Utility model of Schmeidler (1989), which can accommodate different attitudes towards ambiguity. Chapter 3 studies the implications of reference-dependent ambiguity aversion when reference points are given by the endowment in an Arrow-Debreu exchange economy. I illustrate that no-trade and underinsurance are robust implications of ambiguity aversion when investors view ambiguity from the perspective of their endowments. Chapter 4 extends the decision model to intertemporal choice problems and studies the effects of reference-dependent ambiguity aversion in the context of a dynamic asset pricing model.
Author: Hening Liu
Publisher:
ISBN:
Category : Investments
Languages : en
Pages : 84
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Book Description
Author: Leonard C. MacLean
Publisher: World Scientific
ISBN: 9814417351
Category : Business & Economics
Languages : en
Pages : 941
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Book Description
This handbook in two parts covers key topics of the theory of financial decision making. Some of the papers discuss real applications or case studies as well. There are a number of new papers that have never been published before especially in Part II.Part I is concerned with Decision Making Under Uncertainty. This includes subsections on Arbitrage, Utility Theory, Risk Aversion and Static Portfolio Theory, and Stochastic Dominance. Part II is concerned with Dynamic Modeling that is the transition for static decision making to multiperiod decision making. The analysis starts with Risk Measures and then discusses Dynamic Portfolio Theory, Tactical Asset Allocation and Asset-Liability Management Using Utility and Goal Based Consumption-Investment Decision Models.A comprehensive set of problems both computational and review and mind expanding with many unsolved problems are in an accompanying problems book. The handbook plus the book of problems form a very strong set of materials for PhD and Masters courses both as the main or as supplementary text in finance theory, financial decision making and portfolio theory. For researchers, it is a valuable resource being an up to date treatment of topics in the classic books on these topics by Johnathan Ingersoll in 1988, and William Ziemba and Raymond Vickson in 1975 (updated 2 nd edition published in 2006).
Author: Itzhak Gilboa
Publisher: Cambridge University Press
ISBN: 9780521003117
Category : Business & Economics
Languages : en
Pages : 214
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Book Description
This work, a paradigm for modelling decision-making under uncertainty, describes the general theory and its relationship to planning, repeated choice problems, inductive inference, and learning; and highlights its mathematical and philosophical foundations.
Author: Baruch Fischhoff
Publisher: Springer Science & Business Media
ISBN: 9401714061
Category : Business & Economics
Languages : en
Pages : 268
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Book Description
Economists and psychologists have, on the whole, exhibited sharply different perspectives on the elicitation of preferences. Economists, who have made preference the central primitive in their thinking about human behavior, have for the most part rejected elicitation and have instead sought to infer preferences from observations of choice behavior. Psychologists, who have tended to think of preference as a context-determined subjective construct, have embraced elicitation as their dominant approach to measurement. This volume, based on a symposium organized by Daniel McFadden at the University of California at Berkeley, provides a provocative and constructive engagement between economists and psychologists on the elicitation of preferences.
Author: Nina Biljanovska
Publisher: International Monetary Fund
ISBN: 1513512668
Category : Business & Economics
Languages : en
Pages : 51
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Book Description
An asset bubble relaxes collateral constraints and increases borrowing by credit-constrained agents. At the same time, as the bubble deflates when constraints start binding, it amplifies downturns. We show analytically and quantitatively that the macroprudential policy should optimally respond to building asset price bubbles non-monotonically depending on the underlying level of indebtedness. If the level of debt is moderate, policy should accommodate the bubble to reduce the incidence of a binding collateral constraint. If debt is elevated, policy should lean against the bubble more aggressively to mitigate the pecuniary externalities from a deflating bubble when constraints bind.
Author: Eyal Zamir
Publisher: Oxford Handbooks
ISBN: 0199945470
Category : Business & Economics
Languages : en
Pages : 841
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Book Description
'The Oxford Handbook of Behavioral Economics and Law' brings together leading scholars of law, psychology, and economics to provide an up-to-date and comprehensive analysis of this field of research, including its strengths and limitations as well as a forecast of its future development. Its twenty-nine chapters are organized into four parts.
Author: Dirk Bergemann
Publisher: World Scientific
ISBN: 981437458X
Category : Business & Economics
Languages : en
Pages : 471
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Book Description
Foreword by Eric Maskin (Nobel Laureate in Economics, 2007)This volume brings together the collected contributions on the theme of robust mechanism design and robust implementation that Dirk Bergemann and Stephen Morris have been working on for the past decade. The collection is preceded by a comprehensive introductory essay, specifically written for this volume with the aim of providing the readers with an overview of the research agenda pursued in the collected papers.The introduction selectively presents the main results of the papers, and attempts to illustrate many of them in terms of a common and canonical example, namely a single unit auction with interdependent values. It is our hope that the use of this example facilitates the presentation of the results and that it brings the main insights within the context of an important economic mechanism, namely the generalized second price auction.
