Ludwig, Alexander and Zimper, Alexander ORCID: 0000-0002-3730-3086
(2014).
Biased Bayesian learning with an application to the risk-free rate puzzle.
J. Econ. Dyn. Control, 39.
S. 79 - 98.
AMSTERDAM:
ELSEVIER.
ISSN 1879-1743
Abstract
Based on the axiomatic framework of Choquet decision theory, we develop a closed-form model of Bayesian learning with ambiguous beliefs about the mean of a normal distribution. In contrast to rational models of Bayesian learning the resulting Choquet Bayesian estimator results in a long-run bias that reflects the agent's ambiguity attitudes. By calibrating the standard equilibrium conditions of the consumption based asset pricing model we illustrate that our approach contributes towards a resolution of the risk-free rate puzzle. For a plausible parameterization we obtain a risk-free rate in the range of 3.5-5%. This is 1-2.5% closer to the empirical risk-free rate than according calibrations of the rational expectations model. (C) 2013 Elsevier B.V. All rights reserved.
Item Type: | Journal Article | ||||||||||||
Creators: |
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URN: | urn:nbn:de:hbz:38-447083 | ||||||||||||
DOI: | 10.1016/j.jedc.2013.11.007 | ||||||||||||
Journal or Publication Title: | J. Econ. Dyn. Control | ||||||||||||
Volume: | 39 | ||||||||||||
Page Range: | S. 79 - 98 | ||||||||||||
Date: | 2014 | ||||||||||||
Publisher: | ELSEVIER | ||||||||||||
Place of Publication: | AMSTERDAM | ||||||||||||
ISSN: | 1879-1743 | ||||||||||||
Language: | English | ||||||||||||
Faculty: | Unspecified | ||||||||||||
Divisions: | Unspecified | ||||||||||||
Subjects: | no entry | ||||||||||||
Uncontrolled Keywords: |
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URI: | http://kups.ub.uni-koeln.de/id/eprint/44708 |
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