Asset Return Dynamics under Habits and Bad Environment–Good Environment Fundamentals
Bibliographic Data
| ID | 10175587 |
|---|---|
| Authors | Geert Bekaert (0000-0002-6835-5612, National Bureau of Economic Research), Eric Engström (0000-0002-5207-1930, Federal Reserve Board of Governors) |
| Year | 2017 |
| Volume | 125 |
| Issue | 3 |
| Pages | 713-760 |
| Publication date | 2017-04-27 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0022-3808 • E-ISSN: 1537-534X |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/691450 |
| OpenAlex | W2278839440 |
| Language | EN |
| Citations received | 4 |
| References cited | 26 |
We introduce a “bad environment–good environment” (BEGE) technology for consumption growth in a consumption-based asset pricing model with external habit formation. The model generates realistic non-Gaussian features of consumption growth and fits standard salient features of asset prices including the means and volatilities of equity returns and a low risk-free rate. BEGE dynamics additionally allow the model to generate realistic properties of equity index options prices and their comovements with the macroeconomic outlook. In particular, when option-implied volatility is high—as measured, for instance, by the VIX index—the distribution of consumption growth is more negatively skewed
Asset (computer security · Capital asset pricing model · Consumption (sociology · Econometrics · Economics · Equity (law · Equity premium puzzle · Financial economics · Index (typography · Salient · Volatility (finance · Complex Systems and Time Series Analysis · Computer Science · Financial Markets and Investment Strategies · Stochastic processes and financial applications
| Unique citing works | 4 |
|---|---|
| Citations per year | 0,57 |
| Citation span | 2019 - 2026 (8) |
| Citation velocity | current |
| Highly cited | No |
| Citation types | Neutral: 4 |