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Asset Pricing with Horizon-Dependent Risk Aversion
| Content Provider | Semantic Scholar |
|---|---|
| Author | Andries, Marianne Eisenbach, Thomas Schmalz, Martin C. |
| Copyright Year | 2014 |
| Abstract | We study general equilibrium asset prices in a multi-period endowment economy when agents’ risk aversion is allowed to depend on the maturity of the risk. We find horizon-dependent risk aversion preferences generate a decreasing term structure of risk premia if and only if volatility is stochastic. Our model can thus justify the recent empirical results on the term structure of risk premia if i) the pricing of volatility risk is downward slopping (in absolute value) in the data; and ii) downward-sloping term structures of returns on a given market are solely driven by exposures to volatility risk. We test these predictions both using index options data and by showing that the value premium is related to the exposure to volatility risk. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://newyorkfed.org/research/staff_reports/sr703.pdf |
| Alternate Webpage(s) | https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFA2016&paper_id=1053 |
| Alternate Webpage(s) | https://www.econstor.eu/bitstream/10419/120807/1/812454650.pdf |
| Alternate Webpage(s) | https://www.aeaweb.org/conference/2016/retrieve.php?pdfid=1392 |
| Alternate Webpage(s) | https://conference.nber.org/confer/2014/APf14/Andries.pdf |
| Alternate Webpage(s) | http://www.newyorkfed.org/research/staff_reports/sr703.pdf |
| Alternate Webpage(s) | https://doi.org/10.2139/ssrn.2535919 |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
