Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/182301
Authors: 
Branger, Nicole
Konermann, Patrick
Meinerding, Christoph
Schlag, Christian
Year of Publication: 
2018
Series/Report no.: 
Bundesbank Discussion Paper 37/2018
Abstract: 
Directed links in cash flow networks affect the cross-section of price exposures and market prices of risk in equilibrium. In an asset pricing model featuring mutually exciting jumps, we measure directedness through an asset's shock propagation capacity (spc). In the model, we prove: (i) Cash flow shocks of high spc assets command high market prices of risk, (ii) the price reaction of an asset to its own cash flow shocks is less pronounced for high spc assets. To illustrate our theoretical findings, we estimate an empirical network from industry cash flows and find support for these predictions.
Subjects: 
directed cash flow networks
directed shocks
mutually exciting processes
recursive preferences
JEL: 
G01
G12
D85
ISBN: 
978-3-95729-503-3
Document Type: 
Working Paper
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