This page offers the latest information about workshop series by WINPEC (Waseda Institute of Political Economy).
Macroeconomics
John Stachurski
(Australian National University)
Jun. 20
2022
| Title |
Asset Pricing Models with Preference Shocks: Existence and Uniqueness |
| Date |
June 20, 2022 (Monday) 10:40-12:10 |
| Location |
On campus and via Zoom |
| Abstract |
This paper studies existence and uniqueness of recursive utility in asset pricing
models with preference shocks. We provide conditions that clarify existence and uniqueness
for a wide range of models, including exact necessary and sufficient conditions for standard
formulations. The conditions isolate the roles of preference parameters, as well as the
different risks that drive the consumption and preference shock processes. We show that
existence crucially depends on the intertemporal elasticity of substitution of the investor.
Even slight changes in the IES can turn a model with a well-defined solution into one where
no solution exists. |
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