کد مقاله کد نشریه سال انتشار مقاله انگلیسی نسخه تمام متن
986682 1480815 2013 14 صفحه PDF دانلود رایگان
عنوان انگلیسی مقاله ISI
Asset-pricing implications of biologically based non-expected utility
موضوعات مرتبط
علوم انسانی و اجتماعی اقتصاد، اقتصادسنجی و امور مالی اقتصاد و اقتصادسنجی
پیش نمایش صفحه اول مقاله
Asset-pricing implications of biologically based non-expected utility
چکیده انگلیسی

Results in population ecology suggest that evolutionary successful species should have an adaptive (reference-based) S-shaped utility function that is intrinsically   more sensitive to aggregate than uninsured idiosyncratic shocks—the former cannot be diversified demographically. To test the asset-pricing relevance of these ideas, I embed the non-expected utility specification implied by evolutionary theory into an economy with partial risk sharing due to limited commitment. For the benchmark specification (CRRA=6CRRA=6 over gains), Monte Carlo simulations of a Markov growth economy produce the following results: (i) matching the degree of consumption-smoothing in the cross section, the Sharpe ratio for a Lucas tree is 0.33, an increase of 44 percent relative to expected utility; (ii) the risk-free rate is low, stable and counter-cyclical, hence equity returns, unlike in the expected utility case, have the correct pattern of predictability; (iii) in the cross section, excess returns across equity classes exhibit both a value premium and a size discount with risk adjusted returns that are at least two times higher than their expected utility counterparts.


► Analyzes the asset pricing implications of biologically motivated preferences.
► Simulates the return distributions for a Lucas tree and the six Fama/French classes.
► The unconditional Sharpe ratio for the Lucas tree is 0.33.
► Simulated results match the empirical patter of excess return predictability.
► Cross-sectional equity distribution features a value premium and a size discount.

ناشر
Database: Elsevier - ScienceDirect (ساینس دایرکت)
Journal: Review of Economic Dynamics - Volume 16, Issue 3, July 2013, Pages 497–510
نویسندگان
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