Invites you to a

Macroeconomics and Trade seminar presented by

John Stachurski

(Australian National University) 

Asset Pricing with Preference Shocks: Existence and Uniqueness

Co-authors:

Ole Wilms (Universität Hamburg)

Junnan Zhang (Xiamen University)

Wednesday 19 October

2.00pm – 3.30pm

Via Zoom: Meeting Link

Abstract: This paper studies existence and uniqueness of recursive utility in asset pricing models with preference shocks. We provide conditions that clarify existence and uniqueness for a wide range of models, including exact necessary and sufficient conditions for standard formulations. The conditions isolate the roles of preference parameters, as well as the different risks that drive the consumption and preference shock processes. We show that existence depends crucially on the intertemporal elasticity of substitution (IES) of the investor. Even slight changes in the IES can turn a model with a well-defined solution into one where no solution exists.

For further information contact: Macroeconomics and Trade seminar series coordinator Dr James Graham (james.a.graham@sydney.edu.au)

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