B The Separability of Aggregate and Idiosyncratic Risk
ثبت نشده
چکیده
Implementation The algorithm works as follows. We start with a matrix ĝ(s, s). Given this matrix, we can compute the aggregate state price in the stationary version of the economy, denoted P̂ (s)/P̂ (s). In computing the equilibrium, we find it more convenient to keep track of agents by their consumption share c rather than their (normalized) multiplier ζ. Note that c = ζ. To come up with an initial guess for household savings â0(c, s, η), we assume that c is unchanged and we simply use the savings equation to compute â0. To compute the household savings function âj+1 in stage j + 1 of the iteration given âj we implement the following algorithm:
منابع مشابه
Idiosyncratic Risk and Disclosure of Corporate Social Responsibility: Emphasizing the Role of Corporate Governance
In this study, the impact of corporate social responsibility (CSR ) disclosure on idiosyncratic risk has been investigated concerning three stakeholder theory, information asymmetry, and risk management. It also goes further and explores the impact of some corporate governance mechanisms such as ownership structure, board characteristics, and incentive contracts on this relationship. To achieve...
متن کاملThe Irrelevance of Market Incompleteness for the Price of Aggregate Risk∗
In models with a large number of agents who have constant relative risk aversion (CRRA) preferences, the absence of insurance markets for idiosyncratic labor income risk has no effect on the premium for aggregate risk if the distribution of idiosyncratic risk is independent of aggregate shocks. In spite of the missing markets, a representative agent who consumes aggregate consumption prices the...
متن کاملIdiosyncratic Labour Income Risk and Aggregate Consumption: an Unobserved Component Approach
We investigate the importance of aggregate and consumer-specific or idiosyncratic labour income risk for aggregate consumption changes in the US over the period 1952-2001. Theoretically, the effect of labour income risk on consumption changes is decomposed into an aggregate and into an idiosyncratic part. Empirically, aggregate risk is modelled through a GARCH process on aggregate labour income...
متن کاملAsset Demands of Heterogeneous Consumers with Uninsurable Idiosyncratic Risk
We examine asset market equilibrium in an intertemporal economic model with individual and aggregate uncertainty and where the asset market is incomplete. Modigliani-Miller leverage irrelevance holds, even when consumers face borrowing constraints, because individual firms cannot alter the equilibrium portfolio of securities available to consumers. We show that households demand less risky port...
متن کاملRisk and Return in Village Economies
We study risk and return on farm and non-farm business enterprises in village economies. A risk-sharing benchmark predicts that only aggregate covariate risk contributes to the risk premium. An autarky benchmark predicts that overall fluctuation, idiosyncratic plus aggregate, is the only concern. Empirical findings from semi-urban and rural Thai households with extensive family networks quantif...
متن کامل