Asset Pricing with Preference Shocks: Existence and Uniqueness
Speaker: Prof John Stachurski
Affiliation: Australian National University
Location: Room 309, Steele Building (#03), UQ St Lucia campus
Abstract
This paper studies existence and uniqueness of recursive utility in asset pricing models with preference shocks. We provide conditions that clarify existence and uniqueness for a wide range of models, including exact necessary and sufficient conditions for standard formulations. The conditions isolate the roles of preference parameters, as well as the different risks that drive the consumption and preference shock processes. We show that existence depends crucially on the intertemporal elasticity of substitution (IES) of the investor. Even slight changes in the IES can turn a model with a well-defined solution into one where no solution exists.
About the presenter's meeting
Prof Stachurski will be visiting the School of Economics on Friday 21st October. While here, he will be using Room 520A, Level 5, Colin Clark Building. If you would like to meet with Prof Stachurski, please contact Dr Priscilla Man to organise the time.
About School Seminar Series
The School of Economics General Seminar Series is held on Fridays. These are in-person and presented by a range of guest researchers from around Australia and internationally.