International Asset Pricing with Recursive Preferences
AbstractFocusing on US and UK, we document that both the Backus and Smith (1993) finding, concerning the low correlation between consumption differentials and exchange rates, and the forward-premium anomaly, concerning the tendency of high interest rate currencies to appreciate, have become more severe through time. After accounting for different capital mobility regimes, we show that these anomalies turn into general equilibriumregularities in a two-country and two-good economy with Epstein and Zin (1989) preferences, frictionless markets, and highly correlated long-run endowment growth prospects.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 984.
Date of creation: 2012
Date of revision:
Contact details of provider:
Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maurice Obstfeld., 1998.
"The Global Capital Market: Benefactor or Menace?,"
Center for International and Development Economics Research (CIDER) Working Papers
C98-098, University of California at Berkeley.
- Obstfeld, Maurice, 1998. "The Global Capital Market: Benefactor or Menace?," Center for International and Development Economics Research, Working Paper Series qt3kn3n2s8, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Maurice Obstfeld, 1998. "The Global Capital Market: Benefactor or Menace?," NBER Working Papers 6559, National Bureau of Economic Research, Inc.
- Maurice Obstfeld, 2000. "The Global Capital Market: Benefactor or Menace?," International Finance 0004001, EconWPA.
- Hansen, Lars Peter & Jagannathan, Ravi, 1991.
"Implications of Security Market Data for Models of Dynamic Economies,"
Journal of Political Economy,
University of Chicago Press, vol. 99(2), pages 225-62, April.
- Lars Peter Hansen & Ravi Jagannathan, 1990. "Implications of Security Market Data for Models of Dynamic Economies," NBER Technical Working Papers 0089, National Bureau of Economic Research, Inc.
- Lars Peter Hansen & Ravi Jagannathan, 1990. "Implications of security market data for models of dynamic economies," Discussion Paper / Institute for Empirical Macroeconomics 29, Federal Reserve Bank of Minneapolis.
- Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-69, July.
- Anderson, Evan W., 2005. "The dynamics of risk-sensitive allocations," Journal of Economic Theory, Elsevier, vol. 125(2), pages 93-150, December.
- Ravi Bansal & Amir Yaron, 2004.
"Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles,"
Journal of Finance,
American Finance Association, vol. 59(4), pages 1481-1509, 08.
- Ravi Bansal & Amir Yaron, 2000. "Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles," NBER Working Papers 8059, National Bureau of Economic Research, Inc.
- Karen K. Lewis, 1999. "Trying to Explain Home Bias in Equities and Consumption," Journal of Economic Literature, American Economic Association, vol. 37(2), pages 571-608, June.
- David K. Backus & Gregor W. Smith, 1992. "Consumption and Real Exchange Rates in Dynamic Exchange Economies with Nontraded Goods," Working Papers 92-7, New York University, Leonard N. Stern School of Business, Department of Economics.
- Fama, Eugene F., 1984. "Forward and spot exchange rates," Journal of Monetary Economics, Elsevier, vol. 14(3), pages 319-338, November.
- Nikolai Roussanov & Robert Ready, 2012.
"Commodity Trade and the Carry Trade: a Tale of Two Countries,"
2012 Meeting Papers
817, Society for Economic Dynamics.
- Robert Ready & Nikolai Roussanov & Colin Ward, 2013. "Commodity Trade and the Carry Trade: a Tale of Two Countries," NBER Working Papers 19371, National Bureau of Economic Research, Inc.
- Matthew Canzoneri & Robert Cumby & Behzad Diba, 2013. "Addressing International Empirical Puzzles: the Liquidity of Bonds," Open Economies Review, Springer, vol. 24(2), pages 197-215, April.
- Yu, Jianfeng, 2013. "A sentiment-based explanation of the forward premium puzzle," Journal of Monetary Economics, Elsevier, vol. 60(4), pages 474-491.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).
If references are entirely missing, you can add them using this form.