The EconomicDynamics Newsletter
Volume 6, Issue 2, April 2005
A free electronic supplement to the Review of Economic Dynamics
distributed through the EconomicDynamics mailing list and
also available on the web at http://www.EconomicDynamics.org/
In this issue:
- The Research Agenda: Dirk Krueger and Fabrizio Perri on
Risk Sharing across Households, Generations and Countries
- EconomicDynamics Interviews Ellen McGrattan on Business
Cycle Accounting and Stock Market Valuation
- Society Economic Dynamics: 2005 Meetings
- Review of Economic Dynamics: Letter from the Coordinating
Editor
- Web review: QM&RBC at 10 Years
- Review: Lengwiler's Microfoundations of Financial Economics
- Impressum
- Subscribing/Unsubscribing/Address change
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The Research Agenda: Dirk Krueger and Fabrizio Perri on Risk
Sharing across Households, Generations and Countries
Dirk Krueger is Professor of Economics, especially
Macroeconomics at Goethe University Frankfurt (Germany).
Fabrizio Perri is Associate Professor of Economics at the
Stern School of Business, New York University and currently
visiting the Research Department at the Federal Reserve Bank
of Minneapolis. They have both worked, often in
collaboration, on issues of consumption risk sharing,
incomplete markets and distributions of income and
consumption.
Risk is pervasive in macroeconomics and the question that
our research has focused on most is whether, how and to what
extent this risk is shared across households or groups of
households. Since the risk that a typical household in the
macro economy faces is large the welfare impact of sharing
it can be substantial. We now briefly describe our research
in this area, carried out jointly and with separate
coauthors.
Risk sharing across households
It is a well known fact that the distribution of earnings
across households is very dispersed. For us, it is crucial
to understand whether these earnings differences across
households are completely determined at the beginning of the
working life of household members (say by their education,
skill or endowments) or whether they are the results of
idiosyncratic earnings shocks realized during the working
life of the members of the household. Recent research (see
for example Storesletten, Telmer and Yaron, 2004) seems to
indicate that these types of shocks (which we will call
earnings risk) are persistent, large and they can be
responsible for as much as 50% of the cross sectional
variation in earnings. To get a sense of their magnitude,
note that household earnings shocks have the same order of
persistence as business cycles shocks, but that their
percentage volatility has been estimated to be roughly 20
times as large as the percentage volatility of business
cycles shocks! Given the sheer size of household earnings
risk it is relevant to understand how and to what extent
this risk can be shared across households, or to what extent
households are at least self-insured.
Theory
One useful benchmark model to assess the extent of risk
sharing is the Arrow-Debreu complete markets model. In that
model households have access to a full set of state
contingent securities for every possible realization of
their income so they can fully insure against earnings risk.
Several authors have argued (see for example Attanasio and
Davis, 1996) that this model overstates the actual risk
sharing possibilities available to households, by showing
that the complete markets model cannot explain the joint
distribution of household earnings and consumption observed
in US cross sectional data. Therefore our research on this
issue has focused on two popular classes of models that
imply only partial risk-sharing or self-insurance of
earnings risk.
In the first model (which we refer to as the standard
incomplete markets model, SIM) households cannot explicitly
share risk with one another, but rather can only self-insure
by trading a single, uncontingent bond, potentially subject
to borrowing constraints. The second model (which we refer
to as the debt constraint model, DCM) follows the work of
Kehoe and Levine (1993) and has been further developed by
Kocherlakota (1996) and Alvarez and Jermann (2000). In this
framework a full set of state contingent contracts is
available to all agents, but that intertemporal contracts
can only be enforced by exclusion from future intertemporal
trade. Since exclusion from credit markets is not infinitely
costly, in some states of the world agents might find
optimal not to repay their debts and suffer the consequences
of exclusion from financial markets. This possibility
endogenously restricts the extent to which each contingent
asset can be traded and thus limits risk sharing. This is an
appealing feature as the extent of risk sharing is not
exogenously assumed but depends on the fundamentals of the
model (i.e. preferences and technology); for some
fundamentals the DCM model generates complete risk sharing,
while for different fundamentals the model generate only
partial or no risk sharing at all.
Our main theoretical contribution has been the analysis of
the DCM model with a continuum of agents. In Krueger and
Perri (1999) we show how to characterize and compute
stationary equilibria of such a model, using the dual
approach developed by Atkeson and Lucas (1992) for private
information economies. The consumption dynamics mirrors the
two main assumptions of this model: a complete set of
contingent consumption claims and constraints on allocations
that require agents to weakly prefer continuation in the
market to reverting to autarky. Since it is agents with
currently high income whose constraint is binding, agents
with high income growth exhibit strong consumption growth,
whereas agents with low income are unconstrained and have
their consumption decline at a common rate as implied by a
perfect consumption insurance Euler equation (we show in the
paper that the equilibrium interest rate lies strictly below
the time discount factor, making consumption drift down over
time when unconstrained).
The crucial friction in this model is the inability of
households to commit to repay their state-contingent debt,
leading to endogenously determined borrowing constraints
whose size depends on how the consequences of default are
determined. In the standard limited commitment model this is
specified as having to consume the autarkic allocation from
the point of default on. While this is motivated by
empirical bankruptcy procedures (and can be relaxed by
admitting only temporary exclusion or saving after default,
as in Krueger and Perri, 1999), it remains true that the
consequence of default is specified essentially exogenous to
the model. In Krueger and Uhlig (2005) we endogenize the
outside option via competition. The outside option of the
agent after default is determined by the best consumption
insurance contract a household can obtain from a competing
financial intermediary, subject to the constraint that the
intermediary has to at least break even with the contract.
What we also show in that paper is that, even though the
extent of consumption insurance depends on the outside
option, the consumption dynamics is essentially the same as
in the DCM model.
Bringing the theory to the data
The workhorse for our empirical analysis is the Consumer
Expenditure (CE) Survey which reports data on earnings,
hours and detailed consumption expenditures for a fairly
large (5000-8000) repeated cross section of US households
from 1980 to 2004. One important object we can compute from
the data set is within-group income inequality, that is,
inequality after controlling for fixed characteristics of
the households such as sex, race and education: a statistic
of this residual inequality (the variance of logs, say) is
the best, if still imperfect, measure of earnings risk we
can obtain from the cross sections of the CE.
One striking fact that emerges from the CE is that, over the
last 25 years, within-group earnings inequality has
increased substantially while within-group consumption
inequality increased only very modestly. This fact suggests
that US households were able to insulate fairly well their
consumption profiles from idiosyncratic earnings risk. In
Krueger and Perri (2002) we ask whether the two models
discussed above are able to explain this fact, in a
quantitatively satisfactory way. We first estimate a
time-varying process for earnings risk. Following a large
previous literature we model earning risk as the sum of two
components: a very persistent autoregressive process and a
purely transitory shock. We estimate this process on CE data
(we are able to identify the two components due to a short
panel dimension of the CE) and find that about half of the
increase in earnings risk is driven by the persistent
component and half by the transitory component. We then feed
this process into both models and find that both predict an
increase in consumption inequality substantially smaller
than the increase in earnings inequality. Comparing models
to consumption data we find that the DCM only slightly
understates the increase in within-group consumption
inequality while the SIM overstates it.
The DCM predicts very little increase in consumption
inequality for two reasons: first households have a full set
of state-contingent securities available so they can insure
well against shocks even if they are persistent. Second the
increased earnings risk makes defaulting and living in
financial autarky more costly and thus borrowing constraints
(which are the only limits to risk sharing) expand as a
response. In other words, the increase in earnings risk
makes risk sharing more valuable and the DCM predicts that
credit/insurance markets will develop in order to provide
more of it.
The reason why also the SIM predicts a more modest increase
in consumption inequality, compared to the increase in
income inequality, is that even with an uncontingent bond
agents can effectively self-insure against the temporary
earnings shocks so that the increase in earnings risk due to
the increase of the variance of temporary shocks does not
translate into consumption. This point was also made by
Heathcote, Storesletten and Violante (2004).
Another important difference between the two models is the
implication for consumer credit. The development of
financial markets generated by the DCM implies a sizable
increase in consumer credit that matches up well with what
we observe in US data. In the SIM model, on the other hand,
the increase in risk implies that households want to
accumulate more assets for self insurance and make less use
of credit lines. Thus along this dimension that model is
less consistent with data as it generates a (small) decline
in consumer credit.
In Krueger and Perri (2005) we evaluate the two models along
a different dimension. We ask directly how household
consumption responds to earnings shocks, a feature
empirically examined by Dynarski and Gruber (1997) with CE
data. Our results mirror the ones derived in Krueger and
Perri (2002): relative to the data the DCM understates the
consumption response to income shocks while the SIM
overpredicts it.
From our work we would draw as final assessment of the two
models that the DCM model has the appealing feature that
risk sharing is endogenous and responds to changes in
fundamentals. It may, however, overstate the true insurance
possibilities of households, due to the presence of a full
set of state contingent securities. On the other hand, the
SIM model probably understates the ability households have
to insulate their consumption from income shocks and does
not capture the fact that credit and insurance markets may
evolve in response to change in fundamentals, such as the
stochastic income process households face. We conjecture
that a model that combines aspect of both models has the
most chances of perfectly capturing the empirical facts we
have focused on (note that Blundell, Preston and Pistaferri,
2004 come to similar conclusion by following a different
methodology).
Welfare and policy implications
After having explored the positive consequences of an
increase in earnings risk for consumption we were ultimately
interested in the welfare implications of this increase. And
if the welfare costs of this increase are large, is there
something economic policy can do to reduce them? The two
models discussed above provide very different answers to
these questions.
In the DCM, in principle the endogenous increase in risk
sharing can mitigate the adverse welfare consequences of
increased earnings risk. Actually in Krueger and Perri
(1999, 2002) we show that there can be situations in which
the increase in risk sharing opportunities triggered by the
increase in earnings risk is so large that overall
consumption risk falls, and welfare rises. In those
situations economic policies intended to reduce income
volatility (such as unemployment insurance) may have the
perverse effect of increasing consumption inequality,
because those policies may crowd out the private provision
of consumption insurance more than one-to-one. This
crowding-out mechanism is similar to the effect at work in
Attanasio and Rios-Rull (2001).
On the other hand in the context of the SIM an increase in
earnings risk is always welfare reducing as self-insurance
can only partially offset it. As a consequence policies that
reduce earnings risk are welfare improving. For example, in
Conesa and Krueger (2005) we find that in the SIM the
optimal income tax code is likely to be progressive because
it provides a partial substitute for missing private
insurance markets.
Because theory does not give an unambiguous answer to the
welfare question, in Krueger and Perri (2004) we use a more
empirically guided approach. More concretely, we ask how
much would a household in 1973 have been willing to pay to
avoid the increase in earnings dispersion that has taken
place from 1973 to 2002. In order to do so we first estimate
stochastic processes for household consumption and hours
worked that are consistent with the evolution of the
empirical cross-sectional distributions and with one year
consumption mobility matrices from the CE. For consumption
we also estimate separate stochastic processes for the
between- and within-group component of dispersion, thus
capturing both the change in consumption risk and the change
in permanent consumption dispersion. Consistently with our
previous work we find that the increase in consumption risk
has been very modest and thus it has had a very mild welfare
impact. On the other hand the increase in between-group
dispersion, although not extremely large either, has a much
more persistent nature and thus more important welfare
consequences. To quantify these we employ a standard
lifetime utility framework, together with our estimates of
the stochastic processes for the relevant variables. We find
that the welfare losses for a substantial fraction of the US
population amount to 2 to 3 percent of lifetime consumption
and that for some groups (in particular households with low
education) the cost can be as large as 6% of lifetime
consumption. Heathcote, Storesletten and Violante (2004,
2005) use incomplete markets models to assess the welfare
consequences of the recent increase in wage inequality and
find numbers comparable to ours. Their approach also
captures the interesting effect that, in a model with
endogenous labor supply, an increase in wage dispersion
raises earnings risk but also raises average earnings, so
that the negative welfare impact of higher risk is further
mitigated.
Risk sharing across generations
If wages and returns to capital are imperfectly correlated,
then there is scope to share aggregate wage and capital
income risk across generations. Young households derive most
of their income from labor, whereas old households finance
old-age consumption mostly via income generated from their
assets. If financial markets are incomplete in that
households cannot trade a full set of contingent claims on
aggregate uncertainty, then a policy such as social security
that provides old, asset rich households a claim to labor
income, may endow households with welcome risk
diversification. In Krueger and Kubler (2002, 2004) we show
that even if an economy is dynamically efficient in the
sense of Samuelson's seminal work on the Overlapping
Generations model, the introduction of social security may
constitute a Pareto-improving reform because it helps to
achieve a better allocation of wage/return risk across
households. But we also show that for this argument to work
quantitatively, shocks to private asset returns have to be
as big as return risk to the US stock market, fairly
uncorrelated with wage risk and households have to be very
risk averse and fairly willing to intertemporally substitute
consumption. High risk aversion (a coefficient of relative
risk aversion of at least 15) is needed for households to
value better risk allocation, while high intertemporal
elasticity of substitution is required to keep in check the
capital-crowding out effect of social security in general
equilibrium. We conclude that, for a realistically
calibrated OLG economy the intergenerational risk-sharing
effects alone are unlikely to provide a normative argument
for the introduction of social security. However, Conesa and
Krueger (1999) argue that the positive intragenerational
insurance and redistribution effects from the current US
social security system may be sufficient to make a
transition from the current system to no social security
undesirable for a majority of households currently alive.
Risk Sharing across countries
However, some early research (Backus, Kehoe and Kydland,
1992) has shown that, in the context of a standard one-good
complete markets international business cycles model (IRBC),
complete cross-country risk sharing is not consistent with
basic business cycles facts, suggesting that international
risk sharing might be limited. In Kehoe and Perri (2002) we
analyze whether limited enforcement of international
contracts could be responsible for limited risk sharing. We
characterize and solve the IRBC model with limited
enforcement and find that this imperfection can greatly
reduce the amount of international risk sharing in the
model. We also find that, although the IRBC model with
limited enforcement can account for business cycle facts
much better than the complete markets model, discrepancies
remain between theory and data.
In some recent work (Heathcote and Perri, 2005) we are
exploring this issue in the context of a richer model,
namely the IRBC model with two goods and with taste shocks.
In that context we find that a high degree of international
risk-sharing is consistent with several observations for
developed economies, especially in the last 10-15 years. In
particular for this period, it is consistent with most
international business cycle facts (including the relatively
low cross-country correlation of consumption), with the
proportion of foreign asset in country portfolios (the
international diversification puzzle) and with the low
observed correlation of the real exchange rate with relative
consumption. This suggests that one of the roles of
financial globalization (which has happened in the last
15-20 years) has been to improve international risk sharing
among developed countries.
What Next
In our empirical work on inequality a crucial component for
the evolution of consumption inequality are service flows
from consumer durables. Our empirical results also suggest
that these services make up a growing share of consumption
of households. This motivates us to explore an extension of
the limited commitment model that explicitly incorporates
consumer durables and collateralized debt, in the same
spirit as Fernandez-Villaverde and Krueger (2002). The asset
pricing implications of such a model have already
successfully been explored by Lustig and van Nieuwerburgh
(2004). We intend to use this model to assess to what extent
relaxed collateral constraints and improved risk sharing can
affect the dynamics of aggregate expenditures on durables
over the business cycle, and more concretely, whether these
factors have had role in the decline of US Business cycles
volatility that many researchers have documented
Selected references to the papers mentioned are available in
the web version of this newsletter at
http://www.EconomicDynamics.org/newsletter.htm
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EconomicDynamics Interviews Ellen McGrattan on Business
Cycle Accounting and Stock Market Valuation
Ellen McGrattan is Monetary Advisor at the Research
Department of the Federal Reserve Bank of Minneapolis and
Adjunct Professor of Economics at the University of
Minneapolis. She has worked on a large number of topics,
such as business cycles, equity premiums, optimal debt and
solution methods.
EconomicDynamics: With V.V. Chari and Pat Kehoe, you show
that the driving forces in business cycle model are well
summarized by efficiency, labor and investment wedges. Using
the Great Depression and the 1982 recession in the US, you
argue that investment wedges are not relevant. In work with
Prescott, you demonstrate that the recent stock market boom
can be traced to changes in dividend taxation. Are these two
result not contradictory?
Ellen McGrattan: No they are not contradictory.
But to explain that requires some background. In 'Business
Cycle Accounting', we propose a methodology---one that is,
in my opinion, much better than the SVAR methodology---to
isolate promising classes of business cycle theories. There
are two parts. The first is to show that a large class of
models are equivalent to a prototype growth model with
time-varying "wedges" resembling time-varying productivity,
labor income tax rates, investment tax rates, and government
consumption. The second is the accounting part: measure
wedges using data and feed them into the prototype growth
model to determine their contributions to aggregate
fluctutations. We find that the investment "wedge" (which
looks just like a time-varying tax rate on investment) does
not contribute significantly to aggregate fluctuations.
Therefore, models in which frictions manifest themselves as
investment wedges are not promising for studying business
cycles. These include those with credit market frictions
such as Bernanke and Gertler (1989).
In the paper with Ed entitled 'Taxes, Regulations, and the
Value of US and UK corporations', we consider the dramatic
secular changes in the value of US and UK corporate equities
that occurred between the 1960s and 1990s, when there was
little change in corporate capital stocks, after-tax
corporate earnings, or corporate net debt. In particular, we
ask what growth theory predicts for equities given estimates
of taxes and productive capital stocks. There were two
innovations that we made that are worth noting. The first
innovation was a method to estimate the value of corporate
intangible capital, which is not included in measures of
productive capital but adds to the value of corporations.
Our estimate for intangible corporate capital is large,
roughly 2/3 as big as tangible corporate capital. The second
innovation was to bring public finance back into finance and
relate the large movements in equity values to large
movements in the effective tax rate on corporate
distributions (e.g., dividends). A key proposition is that a
decline in the tax rate on corporate distributions implies a
rise in stock values and (if revenues are rebated back) no
change in the reproducible cost of capital. This is what we
see in the data.
Now let me go back to your question about possible
inconsistencies between Chari-Kehoe-McGrattan and
McGrattan-Prescott. One reason they are not inconsistent is
the key tax rate for MP is the tax rate on corporate
distributions. The level of the tax rate on distributions
does not enter the dynamic Euler equation, only the growth
rate if it is time-varying. If the variation in tax rates
quarter by quarter is not large, then the implied investment
wedge in big downturns is relatively small and not
particularly relevant for cyclical behavior. MP focus on
secular change over 40 or 50 years.
ED: Again with V.V. Chari and Pat Kehoe, you have recently
worked on sudden stops and how financial crises alone cannot
trigger drops in output. In fact, such a crisis would
increase output. What critical ingredient is our basic
intuition missing here?
EM: The basic intuition of the paper is simple. Using the
idea in 'Business Cycle Accounting,' we show an equivalence
between equilibrium outcomes in a small open economy and a
closed-economy growth model. A rise in net exports in the
small open economy (a sudden stop) is equivalent to a rise
in government spending in the closed economy. We know what
happens when government spending goes up in the closed
economy model: output rises. Thus, we show that sudden
stops, by themselves, do not lead to decreases in output.
They lead to increases. To account for both sudden stops and
output drops, one needs some other friction.
I think what the literature has missed is that the sudden
stop is not the primary shock but rather a symptom of
domestic problems, bad policies, or distortions. If one
treats it as the primary shock, the economy will look just
like one that had a big increase in government spending
(since government spending and net exports enter the
resource constraint in the same way). Researchers should be
thinking about the driving forces behind the sudden stops.
ED: With your business cycle accounting procedure, you
determine what proportion of the output volatility can be
accounted for by the various wedges. But is it fitting to
call this business accounting? We all learned that the
business cycle is not just characterized by output
volatility, but also by relative volatilities and
comovements. In other words, isn't reducing all possible
shocks and frictions to three or four wedges
oversimplifying?
EM: We don't just look at output -- we decompose labor and
investment as well. And we are (in a revision) putting in
details of relative volatilities and comovements because a
referee was interested in comparing the results to other
papers in the business cycle literature.
Because the wedges are correlated, there are subtle issues
about exactly how one should attribute total variances to
each shock. We acknowledge that -- but it is something one
can't avoid. We do compare our realization-based accounting
procedure to spectral decompositions. The two ways of
accounting for the business cycle are both informative in my
opinion.
Selected references to the papers mentioned are available in
the web version of this newsletter at
http://www.EconomicDynamics.org/newsletter.htm
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Review of Economic Dynamics: Letter from the Coordinating
Editor
The Review of Economic Dynamics is now in its 8th year and
going strong. In fact, the number of submissions received so
far this year is almost double the number received by this
point last year. And, I think the average quality of our
submissions has been increasing rapidly as well. There is no
doubt that the success of the journal has followed hand in
hand with the incredible success of the Society. The number
and average quality of submissions to the SED Annual Meeting
has also been growing substantially each year.
But, continuing growth and success requires that new
editorial blood be introduced on a regular basis. I began
serving as Coordinating Editor of RED in the summer of 2000,
when Tom Cooley needed to step down after seeing the journal
through its first critical years. It is now my turn to step
down in order to move on to other activities.
I am please to announce that Narayana Kocherlakota will be
taking over as Coordinating Editor of RED beginning this
summer. Of course, Narayana is well known to members of the
Society and anyone who follows research on economic
dynamics. He has been an Editor of RED since 2003 after
serving as an Associate Editor beginning in 2002. He has
also served as Program Chair for the 2002 Annual Meeting
held in New York and gave a plenary lecture at last year's
meeting in Florence, Italy. His research contributions are
unusually broad and have spanned a wide range of theoretical
and applied topics, including ones related to dynamic public
finance, monetary economics, dynamic games, real business
cycle theory, and macro-econometrics. I feel extremely
fortunate to be turning the management of this journal over
to such qualified and capable hands.
Over the next few months, we will be adding some additional
Associate Editors to replace several who have recently
stepped down. Outgoing Associate Editors include Jordi Galí,
Per Krusell, Aldo Rustichini, and Robert Shimer. I have
enjoyed working with each of these editors and the journal
has benefited substantially from their efforts. I want to
take this opportunity to publicly thank them for their
valuable service to RED.
In closing, I want to urge all of you to submit your work to
RED. Instructions for submitting online can be found at
http://ees.elsevier.com/red/.
Gary Hansen
RED Coordinating Editor
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Society Economic Dynamics: 2005 Meetings
The SED 2005 Meetings in Budapest on June 23-25 are the
first to be held in Eastern Europe. A cocktail party the
first night, held in the Hungarian Academy of the Sciences
building along the picturesque Danube River, will see Robert
Lucas presenting a tribute to Nobel prize winners Edward
Prescott and Finn Kydland. The Europa River Boat will cruise
the Danube with participants for the Conference Dinner on
Saturday night. Paper sessions are to be held at George
Soros's Central European University, with plenary sessions
in the nearby Hungarian Academy building. Everything is
centrally located in Pest near to the Danube, and directly
across from the famous Castle district in Buda. Sponsors are
the Hungarian National Bank and the CIB commercial bank.
Details are available at
http://www.EconomicDynamics.org/currentSED.htm.
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Web review: QM&RBC at 10 Years
Launched in June 1995, the Quantitative Macroeconomics &
Real Business Cycle was one of the very first topical web
sites in Economics. At that time, the web was little
organized and in fact still unknown to most. The QM&RBC web
site thus helped organize the material already available on
the web and contributed some of its own as BibTex files of a
comprehensive bibliography, data and papers.
Since then, most people have learned how to find material on
the web, most researchers now have a homepage, and the
profession is much better organized in disseminating its
efforts through the Internet. Thus, in ten years, the value
added of the QM&RBC has shifted. Instead of showing that
there is something out there, the focus is now on sorting
and presenting the most interesting contributions. The
bibliography and conference announcements are now selective.
In addition, the web site is now in the midst of a drive to
collect computer codes that can replicate many of the
important papers of the literature, on top of the various
tools for solving standard models. As of this writing, 125
pieces of code are assembled. Not only does this allow to
have all this code conveniently in one place, it also
preserves them from being lost.
In the age of Google, there is still a place for topical web
sites in academics. QM&RBC can be found at
http://dge.repec.org/.
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Review: Lengwiler's Microfoundations of Financial Economics
Microfoundations of Financial Economics, An Introduction to
General Equilibrium Asset Pricing
by Yvan Lengwiler
This textbook is written for Masters or PhD students in
Finance and Macroeconomics and builds the classic theories
of financial economics from the ground up. Starting with
contigents claim makets and the welfare theorems, the book
gradually builds equilibrium concepts and different
representations of risk. It covers the basic theories, CAPM,
CCAPM, and dynamic trading. The main empirical puzzles are
exhibited along with the main attempts to explaim them.
This book can be a great asset for PhD students that are
overwhelmed by asset pricing as it is covered in, say,
Ljungqvist and Sargent and need a less concise presentation.
In this sense, it nicely complements the more advanced
textbooks. It also makes asset pricing accessible to even
moderately quantitatively inclined MBA or terminal Masters
students. Yvan Lengwiler produced a nice addition to recent
publications that bridge the gap between undergraduate and
advanced PhD textbooks.
"Microfoundations of Financial Economics" is published by
Princeton University Press.
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Impressum
The EconomicDynamics Newsletter is a free supplement to the Review of
Economic Dynamics. It is distributed through the EconomicDynamics mailing
list and archived at http://www.EconomicDynamics.org/newsletter.htm. The
responsible editors are Christian Zimmermann (RED associate editor),
[log in to unmask] and Gary Hansen (RED coordinating editor),
[log in to unmask]
The EconomicDynamics Newsletter is published twice a year in April and
November.
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