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Tassi di interesse reali, rischio di lungo periodo e cicli economici

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  • Giorgio PIZZUTTO

    ()

Abstract

Real interest rates, long run risks and business cycles. Standard theoretical model under power utility preferences generates time series for real yields and output that are not consistent with the cyclical properties of the macroeconomic data. In particular real interest rates of the model are highly procyclical, while measured real interest rates are countercyclical. Following recent developments in equity premium literature we explore this question in a long run risk environment with generalized isoleastic preferences. This approach explains equity premium puzzle, but it fails to fit real bond prices and their dynamics in relation to business cycles if we model exogenous consumption growth with a persistent component and time-varying volatility.

Suggested Citation

  • Giorgio PIZZUTTO, 2008. "Tassi di interesse reali, rischio di lungo periodo e cicli economici," Departmental Working Papers 2008-05, Department of Economics, Management and Quantitative Methods at Universit√† degli Studi di Milano.
  • Handle: RePEc:mil:wpdepa:2008-05
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    File URL: http://wp.demm.unimi.it/files/wp/2008/DEMM-2008_005wp.pdf
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    References listed on IDEAS

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    1. 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, August.
    2. John Y. Campbell, Robert J. Shiller, 1988. "The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors," Review of Financial Studies, Society for Financial Studies, pages 195-228.
    3. John Y. Campbell, 1986. "Bond and Stock Returns in a Simple Exchange Model," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 785-803.
    4. Breeden, Douglas T., 1979. "An intertemporal asset pricing model with stochastic consumption and investment opportunities," Journal of Financial Economics, Elsevier, vol. 7(3), pages 265-296, September.
    5. 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 937-969, July.
    6. Beaudry, Paul & Guay, Alain, 1996. "What do interest rates reveal about the functioning of real business cycle models?," Journal of Economic Dynamics and Control, Elsevier, vol. 20(9-10), pages 1661-1682.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Asset pricing; long run risk; bond premium puzzle; business cycles;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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