Risk Aversion or Model Uncertainty? An Empirical Cross-Sectional Analysis Across Countries
| Autor: | Pedro Engel, Joao Paulo Valente, Caio Almeida |
|---|---|
| Rok vydání: | 2019 |
| Předmět: |
Consumption (economics)
General Computer Science Risk aversion Equity premium puzzle 05 social sciences Ambiguity aversion 01 natural sciences 010104 statistics & probability 0502 economics and business Econometrics Economics Model risk 0101 mathematics Macro Emerging markets Preference (economics) 050205 econometrics |
| Zdroj: | Brazilian Review of Econometrics. 38:321 |
| ISSN: | 1980-2447 |
| Popis: | By analyzing a panel of macro data including both Emerging Markets (EM) and Advanced Economies (AE), we identify that an acceptable level of model uncertainty helps to explain the equity premium existing in all these markets. Model uncertainty aversion is in general higher for EMs than for AEs. In addition, the degree of cross-sectional heterogeneity across countries' estimates of model uncertainty aversion is smaller than the corresponding heterogeneity of the risk aversion estimates in a traditional CRRA preference. We also compute separate costs of model risk and uncertainty for these economies in terms of present consumption, and conclude that the most significant effects come from uncertainty. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|