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dc.contributor.authorKoijen, Ralph S. J.
dc.contributor.authorLustig, Hanno
dc.contributor.authorNieuwerburgh, Stijn Van
dc.contributor.authorVerdelhan, Adrien Frederic
dc.date.accessioned2011-12-21T18:31:12Z
dc.date.available2011-12-21T18:31:12Z
dc.date.issued2010-05
dc.identifier.issn0002-8282
dc.identifier.issn1944-7981
dc.identifier.urihttp://hdl.handle.net/1721.1/67844
dc.description.abstractRepresentative agent consumption based asset pricing models have made great strides in accounting for many important features of asset returns. The long run risk (LRR) models of Ravi Bansal and Amir Yaron (2004) are a prime example of this progress. Yet, several other representative agent models, such as the external habit model of John Y. Campbell and John H. Cochrane (1999) and the variable rare disasters model of Xavier Gabaix (2008), seem to be able to match a similar set of asset pricing moments. Additional moments would be useful to help distinguish between these models. Hanno Lustig, Stijn Van Nieuwerburgh, and Adrien Verdelhan (2009) argue that the wealth-consumption ratio is such a moment. A comparison of the wealthconsumption ratio in the LRR model and in the data is favorable to the LRR model. This is no small feat because the wealth-consumption ratio is not a target in the usual calibrations of the model, and the LRR is—so far—the sole model able to reproduce both the equity premium and the wealth-consumption ratio. The LRR model matches the properties of the wealth-consumption ratio despite the fact that it implies a negative real bond risk premium. This is because it generates quite a bit of consumption cash flow risk to offset the negative discount rate risk.en_US
dc.language.isoen_US
dc.publisherAmerican Economic Associationen_US
dc.relation.isversionofhttp://dx.doi.org/10.1257/aer.100.2.552en_US
dc.rightsArticle is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.en_US
dc.sourceProf. Verdelhan via Alex Caracuzzoen_US
dc.titleLong Run Risk, the Wealth-Consumption Ratio, and the Temporal Pricing of Risken_US
dc.typeArticleen_US
dc.identifier.citationKoijen, Ralph S.J et al. “Long Run Risk, the Wealth-Consumption Ratio, and the Temporal Pricing of Risk.” American Economic Review 100 (2010): 552-556. Web. 21 Dec. 2011. © 2010 American Economic Associationen_US
dc.contributor.departmentSloan School of Managementen_US
dc.contributor.approverVerdelhan, Adrien Frederic
dc.contributor.mitauthorVerdelhan, Adrien Frederic
dc.relation.journalAmerican Economic Reviewen_US
dc.eprint.versionFinal published versionen_US
dc.type.urihttp://purl.org/eprint/type/JournalArticleen_US
eprint.statushttp://purl.org/eprint/status/PeerRevieweden_US
dspace.orderedauthorsKoijen, Ralph S.J; Lustig, Hanno; Van Nieuwerburgh, Stijn; Verdelhan, Adrienen
dc.identifier.orcidhttps://orcid.org/0000-0002-0319-5531
mit.licensePUBLISHER_POLICYen_US


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