This paper studies the asset pricing implications of parameter learning in general equilibrium macro-finance models. Learning about the structural parameters governing the exogenous endowment process introduces long-run risks in the subjective consumption dynamics, as posterior mean beliefs are martingales and shocks to mean beliefsare permanent. These permanent shocks have particularly strong asset pricing implications for a representative agent with Epstein-Zin preferences and a preference for early resolution of uncertainty. We consider models with unknown parameters governinglong-run economic growth, rare events, as well as learning in models with structural breaks. In all cases, parameter learning generates long-lasting, quantitatively significant additional risks that can help explain standard asset pricing puzzles.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.

MEER OVER NETSPAR


Missie en strategie           •           Netwerk           •           Organisatie           •          Magazine
Netspar Brief            •            Werkprogramma 2019-2023           •           Onderzoekagenda

OVER NETSPAR

Onze partners

B20160708_tilburg university
B20200214_BlackRock_BLK_eng_black_rgb_small
B20200104_RailOV_logoo.original.grijswaarden
Print
B20190823_mn-logo_small
Bekijk al onze partners