Standard Real Business Cycle (RBC) models are well known to generate counter-factual asset pricing implications. This study provides a simple extension to the prior literature by studying an economy that follows a regime-switching process in conjunction with Epstein-Zin preferences for consumers. We provide a detailed theoretical and numerical analysis of the model's predictions. We also show that a reasonable parameterization of our model conveys financial figures in line with US postwar data. Furthermore, we provide evidence in support of modeling a regime-dependent macroeconomic risk. © 2013 Springer-Verlag Berlin Heidelberg.

D'Addona, S., & Giannikos, C. (2014). Asset pricing and the role of macroeconomic volatility. ANNALS OF FINANCE, 10(2), 197-215 [10.1007/s10436-013-0237-2].

Asset pricing and the role of macroeconomic volatility

D'ADDONA, STEFANO;
2014

Abstract

Standard Real Business Cycle (RBC) models are well known to generate counter-factual asset pricing implications. This study provides a simple extension to the prior literature by studying an economy that follows a regime-switching process in conjunction with Epstein-Zin preferences for consumers. We provide a detailed theoretical and numerical analysis of the model's predictions. We also show that a reasonable parameterization of our model conveys financial figures in line with US postwar data. Furthermore, we provide evidence in support of modeling a regime-dependent macroeconomic risk. © 2013 Springer-Verlag Berlin Heidelberg.
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11590/323544
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