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  4. Parameter Learning in General Equilibrium: The Asset Pricing Implications
 
working paper

Parameter Learning in General Equilibrium: The Asset Pricing Implications

Collin-Dufresne, Pierre  
•
Johannes, Michael
•
Lochstoer, Lars A.
2012

Parameter learning strongly amplifies the impact of macro shocks on marginal utility when the representative agent has a preference for early resolution of uncertainty. This occurs as rational belief updating generates subjective long-run consumption risks. We consider general equilibrium models with unknown parameters governing either long-run economic growth, the variance of shocks, rare events, or model selection. Overall, parameter learning generates long-lasting, quantitatively significant additional macro risks that help explain standard asset pricing puzzles.

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Type
working paper
Author(s)
Collin-Dufresne, Pierre  
Johannes, Michael
Lochstoer, Lars A.
Date Issued

2012

Publisher

Columbia Business School

URL

URL

http://dx.doi.org/10.2139/ssrn.2024130
Written at

EPFL

EPFL units
SFI-PCD  
Available on Infoscience
August 8, 2013
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/94017
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