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

Full text not available from this repository.

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:
CreatorsEmailORCIDORCID Put Code
Ludwig, AlexanderUNSPECIFIEDUNSPECIFIEDUNSPECIFIED
Zimper, AlexanderUNSPECIFIEDorcid.org/0000-0002-3730-3086UNSPECIFIED
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:
KeywordsLanguage
EQUITY PREMIUM; EXPECTED UTILITY; MONETARY-POLICY; DYNAMIC CHOICE; ASSET PRICES; DOUBT; SUBSTITUTION; PROBABILITY; CONSUMPTION; AMBIGUITYMultiple languages
EconomicsMultiple languages
URI: http://kups.ub.uni-koeln.de/id/eprint/44708

Downloads

Downloads per month over past year

Altmetric

Export

Actions (login required)

View Item View Item