Long-Run Risk Unwrapped: An Analytical Expression of the Wealth-Consumption Ratio
27 Pages Posted: 4 Dec 2023
There are 2 versions of this paper
Long-Run Risk Unwrapped: An Analytical Expression of the Wealth-Consumption Ratio
Number of pages: 27
Posted: 01 Dec 2023
Downloads
27
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 practically identical to the exact numerical solution.
Keywords: wealth-consumption ratio, analytical solution, long-run risk
Suggested Citation: Suggested Citation
Patelli, Ella and Trudeau, Gabrielle, Long-Run Risk Unwrapped: An Analytical Expression of the Wealth-Consumption Ratio. Available at SSRN: https://ssrn.com/abstract=4652870 or http://dx.doi.org/10.2139/ssrn.4652870
Do you have a job opening that you would like to promote on SSRN?
Feedback
Feedback to SSRN