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Horizon-Dependent Risk Aversion and the Timing and Pricing of Uncertainty

Marianne Andries, Thomas M. Eisenbach et Martin Schmalz

Résumé

We propose a model that addresses two fundamental challenges concerning the timing and pricing of uncertainty: established equilibrium asset pricing models require a controversial degree of preference for early resolution of uncertainty; and do not generate the downward-sloping term structure of risk premia suggested by the data. Inspired by experimental evidence, we construct dynamically inconsistent preferences in which risk aversion decreases with the temporal horizon. The resulting pricing model can generate a term structure of risk premia consistent with empirical evidence, without forcing a particular preference for resolution of uncertainty or compromising the ability to match standard moments.

Mots-clés

risk aversion; early resolution; term structure; volatility risk;

Codes JEL

  • D03: Behavioral Microeconomics • Underlying Principles
  • D90: General
  • G12: Asset Pricing • Trading Volume • Bond Interest Rates

Référence

Marianne Andries, Thomas M. Eisenbach et Martin Schmalz, Horizon-Dependent Risk Aversion and the Timing and Pricing of Uncertainty, mars 2017.

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Publié dans

mars 2017