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Risk, Uncertainty and Asset Prices / Geert Bekaert, Eric Engstrom, Yuhang Xing.
- Format:
- Book
- Author/Creator:
- Bekaert, Geert.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w12248.
- NBER working paper series no. w12248
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2006.
- Summary:
- We identify the relative importance of changes in the conditional variance of fundamentals (which we call "uncertainty") and changes in risk aversion ("risk" for short) in the determination of the term structure, equity prices and risk premiums. Theoretically, we introduce persistent time-varying uncertainty about the fundamentals in an external habit model. The model matches the dynamics of dividend and consumption growth, including their volatility dynamics and many salient asset market phenomena. While the variation in dividend yields and the equity risk premium is primarily driven by risk, uncertainty plays a large role in the term structure and is the driver of counter-cyclical volatility of asset returns.
- Notes:
- Print version record
- May 2006.
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