000			03064cam a22003257 4500
001			w10210
003			NBER
005			20211020112845.0
006			m o d
007			cr cnu||||||||
008			210910s2004 mau fo 000 0 eng d
100	1		_aMulligan, Casey B. _917251
245	1	0	_aRobust Aggregate Implications of Stochastic Discount Factor Volatility / _cCasey B. Mulligan.
260			_aCambridge, Mass. _bNational Bureau of Economic Research _c2004.
300			_a1 online resource: _billustrations (black and white);
490	1		_aNBER working paper series _vno. w10210
500			_aJanuary 2004.
520	3		_aThe stochastic discount factor seems volatile, but is this observation of any consequence for aggregate analysis of consumption, capital accumulation, output, etc.? I amend the standard frictionless model of aggregate consumption and capital accumulation with time-varying subjective probability adjustments, and obtain four implications for aggregate economic analysis. First, subjective probability adjustments add volatility to the stochastic discount factor, and can rationalize any pattern of asset prices satisfying no-arbitrage, even while capital accumulation is efficient. Second, despite its flexibility in pricing assets, the model implies that, in expected value, the intertemporal marginal rate of transformation is equal to the intertemporal marginal rate of substitution, and there is a simple, stable, and familiar relation between consumption growth and capital's return. Third, the expected returns on assets in small net aggregate supply are weakly (and sometimes negatively) correlated with capital's expected return, and are thereby poor predictors of aggregate consumption growth. Fourth, when it comes to assets in small net aggregate supply, capital gains reflect time varying risk premia, and returns can predict aggregate consumption growth better when the capital gain component of those returns is ignored. All four implications are consistent with empirical results reported here, and in the previous literature documenting stochastic discount factor volatility. Several recent theories of stochastic discount factor volatility can, from the aggregate point of view, be interpreted as special cases of subjective probability adjusted CCAPM.
530			_aHardcopy version available to institutional subscribers
538			_aSystem requirements: Adobe [Acrobat] Reader required for PDF files.
538			_aMode of access: World Wide Web.
588	0		_aPrint version record
690		7	_aE21 - Consumption • Saving • Wealth _2Journal of Economic Literature class.
690		7	_aG12 - Asset Pricing • Trading Volume • Bond Interest Rates _2Journal of Economic Literature class.
710	2		_aNational Bureau of Economic Research.
830		0	_aWorking Paper Series (National Bureau of Economic Research) _vno. w10210.
856	4	0	_uhttps://www.nber.org/papers/w10210
856			_yAcceso en línea al DOI _uhttp://dx.doi.org/10.3386/w10210
942			_2ddc _cW-PAPER
999			_c337961 _d296523