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dc.contributor.author Bansal, Ravi en_US
dc.contributor.author Gallant, A. Ronald en_US
dc.contributor.author Tauchen, George en_US
dc.date.accessioned 2010-03-09T15:41:28Z
dc.date.available 2010-03-09T15:41:28Z
dc.date.issued 1999 en_US
dc.identifier.uri http://hdl.handle.net/10161/2019
dc.description.abstract estimates and examines the empirical plausibility of asset pricing models that attempt to explain features of financial markets such as the size of the equity premium and the volatility of the stock market. In one model, the long-run risks (LRR) model of Bansal and Yaron, low-frequency movements, and time-varying uncertainty in aggregate consumption growth are the key channels for understanding asset prices. In another, as typified by Campbell and Cochrane, habit formation, which generates time-varying risk aversion and consequently time variation in risk premia, is the key channel. These models are fitted to data using simulation estimators. Both models are found to fit the data equally well at conventional significance levels, and they can track quite closely a new measure of realized annual volatility. Further, scrutiny using a rich array of diagnostics suggests that the LRR model is preferred. en_US
dc.format.extent 287847 bytes
dc.format.mimetype application/pdf
dc.language.iso en_US
dc.publisher SSRN eLibrary en_US
dc.subject Asset pricing models en_US
dc.subject Financial markets en_US
dc.subject aggregate consumption en_US
dc.subject long run risks model en_US
dc.subject simulation en_US
dc.title Rational Pessimism, Rational Exuberance, and Asset Pricing Models en_US
dc.type Journal Article en_US
dc.department Economics

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