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research article

Parameter Learning in General Equilibrium: The Asset Pricing Implications

Collin-Dufresne, Pierre  
•
Johannes, Michael
•
Lochstoer, Lars A.
2016
American Economic Review

Parameter learning strongly amplifies the impact of macroeconomic 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, rare events, or model selection. Overall, parameter learning generates long-lasting, quantitatively significant additional macroeconomic risks that help explain standard asset pricing puzzles.

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Type
research article
DOI
10.1257/aer.20130392
Web of Science ID

WOS:000371277400006

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

2016

Publisher

American Economic Association

Published in
American Economic Review
Volume

106

Issue

3

Start page

664

End page

698

Editorial or Peer reviewed

REVIEWED

Written at

EPFL

EPFL units
SFI-PCD  
Available on Infoscience
April 1, 2016
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/125275
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