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dc.contributor.authorLettau, Martinen
dc.date.accessioned2012-08-17T14:25:33Z-
dc.date.available2012-08-17T14:25:33Z-
dc.date.issued2001-
dc.identifier.urihttp://hdl.handle.net/10419/60568-
dc.description.abstractThis paper uses Hansen and Jagannathan's (1991) volatility bounds to evaluate models with idiosyncratic consumption risk. I show that idiosyncratic risk does not change the volatility bounds at all when consumers have CRRA preferences and the distribution of the idiosyncratic shock is independent of the aggregate state. Following Mankiw (1986), I then show that idiosyncratic risk can help to enter the bounds when idiosyncratic uncertainty depends on the aggregate state of the economy. Since individual consumption data are not reliable, I compute an upper bound of the volatility bounds using individual income data and assume that agents have to consume their endowment. I find that the model does not pass the Hansen and Jagannathan test even for very volatile idiosyncratic income data.en
dc.language.isoengen
dc.publisher|aFederal Reserve Bank of New York |cNew York, NYen
dc.relation.ispartofseries|aStaff Report |x130en
dc.subject.jelE44en
dc.subject.jelG11en
dc.subject.jelG12en
dc.subject.ddc330en
dc.subject.keywordidiosyncratic risk, risk premia, volatility bounds, asset prices, incomplete marketsen
dc.subject.stwCapital Asset Pricing Modelen
dc.subject.stwRisikoen
dc.subject.stwRisikoprämieen
dc.subject.stwVolatilitäten
dc.subject.stwVerbraucherausgabenen
dc.subject.stwTheorieen
dc.titleIdiosyncratic risk and volatility bounds, or can models with idiosyncratic risk solve the equity premium puzzle?-
dc.typeWorking Paperen
dc.identifier.ppn331604086en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen

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