Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 7, 2011 erstellt
Description:
We examine the effects of estimation risk and Bayesian learning on equilibrium asset prices when there is uncertainty about both the first and second moments of consumption and dividend growth rates. For the 1891-2007 period, our model generates a sizable average annual equity premium, relatively low average risk-free rate and a high mean Sharpe ratio that approximates the data average with (1) low risk aversion, (2) non-persistent (i.i.d.) growth rates, (3) power utility, (4) diffuse (or non-pessimistic) priors, and (5) finite posterior moments. Learning does not produce a monotonically declining equity premium and shocks to growth rates can induce sharp fluctuations in the market returns even after one hundred years of data. For reducing the discrepancy between the equilibrium outcomes and the data, variations in the prior estimation risk with respect to consumption --- but not dividend --- growth are at least as effective as variations in risk aversion, or in the inter-temporal elasticity of substitution, or in the persistence of growth rates