Asset Return Dynamics under Bad Environment-Good Environment Fundamentals
Event details
| Date | 27.05.2014 |
| Hour | 10:30 › 12:00 |
| Speaker | Geert BEKAERT (Columbia Business School) |
| Location | |
| Category | Conferences - Seminars |
We introduce a “bad environment-good environment” technology for consumption growth in a consumption-based asset pricing model. Using the preference structure from Campbell and Cochrane (1999), the model generates realistic non-Gaussian features of fundamentals while still permitting closed-form solutions for asset prices. The model not only fits standard salient asset prices features including means and volatilities for equity returns and risk free rates, but also generates realistic features of the “risk-neutral” conditional density of equity returns, including the variance premium.
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