Asset Return Dynamics under Habits and Bad-environment-Good Environment Fundamentals∗
نویسندگان
چکیده
We introduce a “bad environment-good environment” (BEGE) technology for consumption growth in a consumption-based asset pricing model with external habit formation. The model generates realistic non-Gaussian features of fundamentals, and fits standard salient features of asset prices including the means and volatilities of equity returns and risk free rates. BEGE dynamics are essential for the model to generate realistic features of the “risk-neutral” conditional density of equity returns, including the variance premium.
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تاریخ انتشار 2013