Rare Disasters and Asset Pricing Puzzles
|Autor:||Mgr. Martin Kotek|
|Rok:||2016 - letní|
|Vedoucí:|| Ing. Aleš Maršál M.A.
|Typ práce:|| Diplomová
|Abstrakt:||The impact of rare disasters on equity premium and term premium in a New Keynesian DSGE model is
explored in the thesis. Andreasen's (2012) model with Epstein-Zin preferences, bonds and a rare disaster
shock in total factor productivity process is extended by a variable capital stock and an equity-type asset.
We find that the variable capital significantly changes behavior of the model, capital depreciation must
be substantially increased to counter the effect of variable capital and stochastic mean of inflation
increases. The model calibrated to the US economy and a high risk aversion generates 10-year term
premium of 90 basis points, rare disasters increase the premium only by 3 basis points. The equity
premium is 163 basis points and rare disasters increase it also only by 3 basis points. The model with a
low coefficient of relative risk aversion of 5.5 generates negative risk premia. Rare disasters increase the
risk premia by mere 4 basis points in comparison to a model with i.i.d. shocks.