  |
|
|
||||
|
||||
A Long-run Risks Model with Long- and Short-Run Volatilities: Explaining Predictability and Volatility Risk Premium
Guofu Zhou Washington University, St. Louis - John M. Olin School of Business Yingzi Zhu Tsinghua University - School of Economics & Management June 25, 2009 Abstract: In this paper, we extend the long-run risks model of Bansal and Yaron (BY, 2004) to allow both a long- and a short-run volatility component in consumption growth, long-run risks, and dividend growth. Our two volatility model better captures macroeconomic volatility than a single volatility model, and can reconcile simultaneously the large negative market variance risk premium, differing predictability in excess returns, consumption, dividends, and stock market volatility, all of which are difficult to explain previously by the BY model.
Keywords: Long-run Risk, Equity Risk Premium, Predictability, Variance Risk Premium JEL Classifications: G12, G13, E43 Working Paper SeriesDate posted: May 13, 2009 ; Last revised: June 29, 2009Suggested CitationContact Information
|
|
|||||||||||||||||||||||
© 2010 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was served by apollo5b in 0.328 seconds.
One-Click Download
Facebook
Twitter
Digg
Del.icio.us
CiteULike
