Events

Title: Repairing the Disconnect between Asset Pricing and the Macroeconomy: A Production Based Approach (with Kevin Lansing, Fed San Francisco).

Abstract

A general equilibrium asset pricing model with production and investment adjustment cost is developed to address the Uhlig (2018) critique of the disconnect between asset pricing and the macroeconomy. Our model includes two types of shocks that affect the cost of adjusting capital (one temporary and the other permanent) as well as standard productivity and capital depreciation shocks. Using an analytical solution for asset prices, we show that the technology related shocks impose a restriction on the joint distribution of consumption and asset return which helps us repair the disconnect between asset pricing and the real economy. Long run adjustment cost and TFP shock have non-trivial effects on the unconditional equity premium.

Title: Repairing the Disconnect between Asset Pricing and the Macroeconomy: A Production Based Approach (with Kevin Lansing, Fed San Francisco).

Abstract

A general equilibrium asset pricing model with production and investment adjustment cost is developed to address the Uhlig (2018) critique of the disconnect between asset pricing and the macroeconomy. Our model includes two types of shocks that affect the cost of adjusting capital (one temporary and the other permanent) as well as standard productivity and capital depreciation shocks. Using an analytical solution for asset prices, we show that the technology related shocks impose a restriction on the joint distribution of consumption and asset return which helps us repair the disconnect between asset pricing and the real economy. Long run adjustment cost and TFP shock have non-trivial effects on the unconditional equity premium.