Arbeitspapier
Return predictability and stock market crashes in a simple rational expectations model
This paper presents a simple rational expectations model of intertemporal asset pricing. It shows that heterogeneous risk aversion of investors is likely to generate declining aggregate relative risk aversion. This leads to predictability of asset returns and high and persistent volatility. Stock market crashes may be observed if relative risk aversion differs strongly across investors. Then aggregate relative risk aversion may sharply increase given a small impairment in fundamentals so that asset prices may strongly decline. Changes in aggregate relative risk aversion may also lead to resistance and support levels as used in technical analysis. For numerical illustration we propose an analytical asset price formula.
- Sprache
-
Englisch
- Erschienen in
-
Series: CoFE Discussion Paper ; No. 05/05
- Klassifikation
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
- Thema
-
Aggregate relative risk aversion
Equilibrium asset price processes
Excess Volatility
Return predictability
Stock market crashes
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Lüders, Erik
Franke, Günter
- Ereignis
-
Veröffentlichung
- (wer)
-
University of Konstanz, Center of Finance and Econometrics (CoFE)
- (wo)
-
Konstanz
- (wann)
-
2005
- Handle
- URN
-
urn:nbn:de:bsz:352-opus-17807
- Letzte Aktualisierung
-
10.03.2025, 11:45 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Lüders, Erik
- Franke, Günter
- University of Konstanz, Center of Finance and Econometrics (CoFE)
Entstanden
- 2005
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