Examining macroeconomic models through the lens of asset pricing

Jaroslav Borovička, Lars Peter Hansen

    Research output: Contribution to journalArticlepeer-review


    We develop new methods for representing the asset-pricing implications of stochastic general equilibrium models. We provide asset-pricing counterparts to impulse response functions and the resulting dynamic value decompositions (DVDs). These methods quantify the exposures of macroeconomic cash flows to shocks over alternative investment horizons and the corresponding prices or investors' compensations. We extend the continuous-time methods developed in Hansen and Scheinkman (2012) and Borovička et al. (2011) by constructing discrete-time, state-dependent, shock-exposure and shock-price elasticities as functions of the investment horizon. Our methods are applicable to economic models that are nonlinear, including models with stochastic volatility.

    Original languageEnglish (US)
    Pages (from-to)67-90
    Number of pages24
    JournalJournal of Econometrics
    Issue number1
    StatePublished - Nov 1 2014


    • Dynamic value decomposition
    • Markov models
    • Perturbation methods
    • Risk premia
    • Shock elasticities

    ASJC Scopus subject areas

    • Economics and Econometrics


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