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

25 Pages Posted: 24 Mar 2021 Last revised: 8 Nov 2021

See all articles by Xu Cheng

Xu Cheng

University of Pennsylvania - Department of Economics

Winston Wei Dou

The Wharton School, University of Pennsylvania; National Bureau of Economic Research (NBER)

Zhipeng Liao

University of California, Los Angeles (UCLA) - Department of Economics

Date Written: August 25, 2021

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.

Suggested Citation

Cheng, Xu and Dou, Winston Wei and Liao, Zhipeng, A Note on Additional Materials for "Macro-Finance Decoupling: Robust Evaluations of Macro Asset Pricing Models" (August 25, 2021). Econometrica, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3787125 or http://dx.doi.org/10.2139/ssrn.3787125

Xu Cheng (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

HOME PAGE: http://www.sas.upenn.edu/~xucheng/

Winston Wei Dou

The Wharton School, University of Pennsylvania ( email )

2318 Steinberg Hall - Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States

HOME PAGE: http://finance-faculty.wharton.upenn.edu/wdou/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/people/winston_wei_dou?page=1&perPage=50

Zhipeng Liao

University of California, Los Angeles (UCLA) - Department of Economics ( email )

8283 Bunche Hall
Los Angeles, CA 90095-1477
United States

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