Ortu, F., Tamoni, Andrea and Tebaldi, C. (2013) Long-run risk and the persistence of consumption shocks. Review of Financial Studies, 26 (11). pp. 2876-2915. ISSN 0893-9454
Full text not available from this repository.Abstract
We propose a decomposition for time series in components classified by levels of persistence. Employing this decomposition, we provide empirical evidence that consumption growth contains predictable components highly correlated with well-known proxies of consumption variability. These components generate a term-structure of sizable risk premia. At low frequencies we identify a component correlated with long-run productivity growth and commanding a yearly premium of approximately 2%. At high frequencies we identify a component with yearly half-life, which contributes to the equity premium for another 2%. Accounting for persistence heterogeneity, we obtain an estimate of the IES strictly above one and robust across subsamples.
Item Type: | Article |
---|---|
Official URL: | http://rfs.oxfordjournals.org/ |
Additional Information: | © 2013 The Authors |
Divisions: | Finance |
Subjects: | H Social Sciences > HG Finance |
JEL classification: | E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates |
Date Deposited: | 18 Oct 2013 13:41 |
Last Modified: | 09 Oct 2024 20:36 |
Funders: | Bocconi University |
URI: | http://eprints.lse.ac.uk/id/eprint/53611 |
Actions (login required)
View Item |