Biased Bayesian learning and the risk-free rate puzzle

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URL:	https://ub-madoc.bib.uni-mannheim.de/2489
URN:	urn:nbn:de:bsz:180-madoc-24890
Document Type:	Working paper
Year of publication:	2009
The title of a journal, publication series:	None
Place of publication:	Mannheim
Publication language:	English
Institution:	Außerfakultäre Einrichtungen > VWL insb Makroök u Wirtschaftspol (Börsch-Supan 1989-2011)
MADOC publication series:	Veröffentlichungen des MEA (Mannheim Research Institute For the Economics of Aging) > MEA Discussion Papers
Subject:	330 Economics
Classification:	JEL: D83 C79 ,
Subject headings (SWD):	Bayes-Lernen , Risikoprämie , Makroökonomie
Keywords (English):	behavioral macroeconomics , bounded rationality , consumption based asset pricing , risk-free rate puzzle , ambiguity , Bayesian lerning
Abstract:	According to the risk-free rate puzzle the return on safe assests is much lower than predicted by standard representative agent models of consumption based asset pricing. Based on non-additive probability measures arising in Choquet decision theory we develop a closed-form model of Bayesian learning in which the Choquet estimator of the mean consumption growth rate does not converge to its "true" value. It rather expresses a bias that reflects the agents ambiguity about his estimator. We calibrate the standard equilibrium conditions of the consumption based asset pricing model th demonstrate that our approach contributes to a resolution of the risk-free rate puzzle when the agent´s learning process exhibits a moderate degree of ambiguity that is resolved in a pessimistic way.
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