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Time Complementarity and the Behavior of Asset Returns

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Authors
Ahn, ChangMo
Issue Date
1990
Publisher
Seoul Journal of Economics
Citation
Seoul Journal of Economics 3 (No. 3 1990): 263-292
Keywords
Blanchard-Fischer Model; one-sector growth model
Abstract
The testable restrictions on the behavior of asset returns are investigated when variable time preference exhibits time complementarity. It is shown that as time complementarity (i.e., temporal risk preference) increases, the volatility of asset prices increases. It is also shown that time complementarity helps explain excessively volatile asset returns and excessively smooth consumption growth. Our empirical study confirms this result. Variable time preference exhibiting time complementarity improves the overall fitness but there is a substantial evidence when the restrictions are imposed simultaneously for different assets. Consumption from services appears to be a major source of the empirical puzzles documented in the literature.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/898
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.03(3) (Fall 1990)
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