Data di Pubblicazione:
2020
Abstract:
The term structure of equity and its cyclicality are key to understand the risks driving
equilibrium asset prices. We propose a general equilibrium model that jointly explains
four important features of the term structure of equity: (i) a negative unconditional
term premium, (ii) countercyclical term premia, (iii) procyclical equity yields, and (iv)
premia to value and growth claims respectively increasing and decreasing with the
horizon. The economic mechanism hinges on the interaction between heteroskedastic
long-run growth—which helps price long-term cash flows and leads to countercyclical
risk premia—and homoskedastic short-term shocks in the presence of limited market
participation—which produce sizeable risk premia to short-term cash flows. The slope
dynamics hold irrespective of the sign of its unconditional average. We provide empirical support to our model assumptions and predictions.
Tipologia CRIS:
07P-Working Paper
Elenco autori:
Matthijs Breugem; Stefano Colonnello; Roberto Marfe'; Francesca Zucchi
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