Is the market price of risk infinite?
AbstractIn a Bayesian model, a rational-expectations Euler equation involves a learning wedge that disconnects the consumer's IMRS from the rational-expectations pricing kernel. The wedge is extremely volatile and explains the high volatility of the rational-expectations pricing kernel.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 102 (2009)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/ecolet
Market price of risk Hansen-Jagannathan bound Learning Wedges;
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