Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296286 
Year of Publication: 
2022
Citation: 
[Journal:] Quantitative Economics [ISSN:] 1759-7331 [Volume:] 13 [Issue:] 2 [Year:] 2022 [Pages:] 723-759
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
This paper shows the success of valuation risk-time-preference shocks in Epstein-Zin utility-in resolving asset pricing puzzles rests sensitively on the way it is introduced. The specification used in the literature is at odds with several desirable properties of recursive preferences because the weights in the time-aggregator do not sum to one. When we revise the specification in a simple asset pricing model the puzzles resurface. However, when estimating a sequence of increasingly rich models, we find valuation risk under the revised specification consistently improves the ability of the models to match asset price and cash-flow dynamics.
Subjects: 
Recursive utility
asset pricing
equity premium puzzle
risk-free rate puzzle
JEL: 
C15
D81
G12
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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