A microeconomic explanation of the EPK paradox

Arbeitspapier

Supported by several recent investigations the empirical pricing kernel paradox might be considered as a stylized fact. In Chabi-Yo et al. (2008) simulation studies have been presented which suggest that this paradox might be caused by regime switching of stock prices in financial markets. Alternatively, we want to emphasize a microeconomic view. Based on an economic model with state dependent utilities for the financial investors we succeed in explaining the paradox by changes of the risk attitudes. Theoretically, the change behaviour is compressed by the pricing kernels. As a starting point for empirical insights we shall develop and investigate inverse problems in terms of data fits for estimated basic values of the pricing kernel.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB 649 Discussion Paper ; No. 2009,010

Classification and Topics

• Classification: Wirtschaft ; Microeconomic Behavior: Underlying Principles ; Computable and Other Applied General Equilibrium Models ; Mathematical Methods ; Contingent Pricing; Futures Pricing; option pricing
• Subject: Pricing kernel ; representative agent ; empirical pricing kernel ; epk paradox ; state dependent utilities ; switching points ; Börsenkurs ; Anlageverhalten ; Risikopräferenz ; Erwartungsnutzen ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Härdle, Wolfgang Karl ; Krätschmer, Volker ; Moro, Rouslan A.
• Event: Veröffentlichung
• (who): Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
• (where): Berlin
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/25326
• Last update: 10.03.2025, 11:42 AM CET