A Note on Additional Materials for "Macro-Finance Decoupling: Robust Evaluations of Macro Asset Pricing Models"

Abstract

This note contains additional model derivation and numerical details of the main text Cheng,
Dou, and Liao (2021). Section A derives the Euler equations that serve as the asset pricing
moment conditions in the disaster risk model and the long-run risk model. Section B considers
the long-run risk model and shows that the Gaussian limit is an innocuous assumption. Section
C provides derivations for the time-varying disaster risk model in the empirical application of the
main text and some additional discussions on the literature. Section D contains an additional
robustness check for the simulation results in the main text.


The full-text version of this paper can be found at: https://ssrn.com/abstract=3609627.

Keywords: Conditional inference, Information imbalance, Long-run risk, Rare disasters, Structural asset pricing, Weak identification.

JEL Classification: C12, C32, C52, G12.