Is the market price of risk infinite?

Timothy Cogley

doi:10.1016/j.econlet.2008.10.002

Is the market price of risk infinite?

Timothy Cogley

Research output: Contribution to journal › Article › peer-review

Abstract

In a Bayesian model, a rational-expectations Euler equation involves a learning wedge that disconnects the consumer's IMRS from the rational-expectations pricing kernel. The wedge is extremely volatile and explains the high volatility of the rational-expectations pricing kernel.

Original language	English (US)
Pages (from-to)	13-16
Number of pages	4
Journal	Economics Letters
Volume	102
Issue number	1
DOIs	https://doi.org/10.1016/j.econlet.2008.10.002
State	Published - Jan 2009

Keywords

Hansen-Jagannathan bound
Learning
Market price of risk
Wedges

ASJC Scopus subject areas

Finance
Economics and Econometrics

Access to Document

10.1016/j.econlet.2008.10.002

Cite this

@article{6e9d403a53a94ce9b91125093df47fdc,

title = "Is the market price of risk infinite?",

abstract = "In a Bayesian model, a rational-expectations Euler equation involves a learning wedge that disconnects the consumer's IMRS from the rational-expectations pricing kernel. The wedge is extremely volatile and explains the high volatility of the rational-expectations pricing kernel.",

keywords = "Hansen-Jagannathan bound, Learning, Market price of risk, Wedges",

author = "Timothy Cogley",

year = "2009",

month = jan,

doi = "10.1016/j.econlet.2008.10.002",

language = "English (US)",

volume = "102",

pages = "13--16",

journal = "Economics Letters",

issn = "0165-1765",