The Size of the Permanent Component of Asset Pricing Kernels
| Author | : Fernando Alvarez |
| Publisher | : |
| Total Pages | : 76 |
| Release | : 2001 |
| ISBN-10 | : UCSD:31822030020473 |
| ISBN-13 | : |
| Rating | : 4/5 ( Downloads) |
Book Synopsis The Size of the Permanent Component of Asset Pricing Kernels by : Fernando Alvarez
Download or read book The Size of the Permanent Component of Asset Pricing Kernels written by Fernando Alvarez and published by . This book was released on 2001 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive a lower bound for the size of the permanent component of asset pricing kernels. The bound is based on return properties of long-term zero-coupon bonds, risk-free bonds, and other risky securities. We find the permanent component of the pricing kernel to be very large; its volatility is about 100% of the volatility of the stochastic discount factor. This result implies that, if the pricing kernel is a function of consumption, innovations to consumption need to have permanent effects.