Biased Bayesian learning and the risk-free rate puzzle

Ludwig, Alexander ; Zimper, Alexander

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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.
Additional information:

Dieser Eintrag ist Teil der Universitätsbibliographie.

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