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Long-Run Risks and Financial Markets

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  • Ravi Bansal

Abstract

The recently developed long-run risks asset pricing model shows that concerns about long-run expected growth and time-varying uncertainty (i.e., volatility) about future economic prospects drive asset prices. These two channels of economic risks can account for the risk premia and asset price fluctuations. In addition, the model can empirically account for the cross-sectional differences in asset returns. Hence, the long-run risks model provides a coherent and systematic framework for analyzing financial markets.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13196.

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Date of creation: Jun 2007
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Publication status: published as Ravi Bansal, 2007. "Long-run risks and financial markets," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 283-300.
Handle: RePEc:nbr:nberwo:13196

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  30. repec:rus:hseeco:278548 is not listed on IDEAS
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Citations

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Cited by:
  1. Ferson, Wayne & Nallareddy, Suresh & Xie, Biqin, 2013. "The “out-of-sample” performance of long run risk models," Journal of Financial Economics, Elsevier, vol. 107(3), pages 537-556.
  2. Ivan Shaliastovich & George Tauchen, 2010. "Pricing of the Time-Change Risks," Working Papers 10-10, Duke University, Department of Economics.
  3. Zhiguang Wang & Prasad V. Bidarkota, 2008. "A Long-Run Risks Model of Asset Pricing with Fat Tails," Working Papers 0810, Florida International University, Department of Economics.
  4. Prasad V. Bidarkota, 2008. "Incomplete Information in a Long Run Risks Model of Asset Pricing," Working Papers 0802, Florida International University, Department of Economics.
  5. Thomas J. Sargent, 2007. "Commentary on "Long-run risks and financial markets"," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 301-304.

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