A copy of this work was available on the public web and has been preserved in the Wayback Machine. The capture dates from 2017; you can also visit the original URL.
The file type is
We present a novel methodology for estimating/testing the Bansal-Yaron (2004) and related long-run risks (LRR) models based on the observation that the latent state variables are known functions of observables. The large standard error of the estimated IES explains the controversy on its magnitude. The model requires higher persistence of consumption and dividend growth to explain the cross-section of returns than that observed in the data. The model matches the unconditional moments ofdoi:10.2139/ssrn.1104737 fatcat:2gakcesafvgw7hazvedx7hznj4