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Learning about rare disasters: implications for consumption and asset prices
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SYSNO ASEP 0441140 Document Type J - Journal Article R&D Document Type Journal Article Subsidiary J Článek ve WOS Title Learning about rare disasters: implications for consumption and asset prices Author(s) Gillman, Max (NHU-N) RID
Kejak, Michal (NHU-N) RID
Pakoš, Michal (NHU-N) RIDSource Title Review of Finance - ISSN 1572-3097
Roč. 19, č. 3 (2015), s. 1053-1104Number of pages 52 s. Language eng - English Country GB - United Kingdom Keywords rare diasasters ; asset prices ; consumption Subject RIV AH - Economics Institutional support NHU-N - RVO:67985998 UT WOS 000355284400004 EID SCOPUS 84929574430 DOI 10.1093/rof/rfu016 Annotation Rietz (1988) and Barro (2006) subject consumption and dividends to rare disasters in the growth rate. We extend their framework and subject consumption and dividends to rare disasters in the growth persistence. We model growth persistence by means of two hidden types of economic slowdowns: recessions and lost decades. We estimate the model based on the postwar US data using maximum likelihood and find that it can simultaneously match a wide array of dynamic pricing phenomena in the equity and bond markets. The key intuition for our results stems from the inability to discriminate between the short and the long recessions ex ante. Workplace Economics Institute Contact Tomáš Pavela, pavela@cerge-ei.cz, Tel.: 224 005 122 Year of Publishing 2016
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