Download This PaperLong-Run Risk Unwrapped: An Analytical Expression of the Wealth-Consumption Ratio
27 Pages Posted: 1 Dec 2023
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Long-Run Risk Unwrapped: An Analytical Expression of the Wealth-Consumption Ratio
Number of pages: 27
Posted: 01 Dec 2023
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Long-Run Risk Unwrapped: An Analytical Expression of the Wealth-Consumption Ratio
Number of pages: 27
Posted: 04 Dec 2023
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9
Date Written: November 21, 2023
Abstract
We derive an analytical expression for the wealth-consumption ratio (wcr) in a representative agent model with recursive utility over consumption. Our expression assumes that the wcr is exponential affine in expected consumption growth and sets constraints on the mean-reversion of consumption growth. Our analytical expression for the wcr is nearly identical to the exact numerical solution.
Keywords: wealth-consumption ratio, analytical solution, long-run risk
JEL Classification: D81, E30, G12
Suggested Citation: Suggested Citation
Patelli, Ella and Trudeau, Gabrielle, Long-Run Risk Unwrapped: An Analytical Expression of the Wealth-Consumption Ratio (November 21, 2023). Available at SSRN: https://ssrn.com/abstract=4640669 or http://dx.doi.org/10.2139/ssrn.4640669
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