Return Predictability and Stock Market Crashes in a Simple Rational Expectations Model

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dc.contributor.authorFranke, Günter
dc.contributor.authorLüders, Erikdeu
dc.date.accessioned2011-03-25T09:42:43Zdeu
dc.date.available2011-03-25T09:42:43Zdeu
dc.date.issued2006deu
dc.description.abstractThis paper presents a simple rational expectations model of intertemporal asset pricing. It shows that state-independent heterogeneous risk aversion of investors is likely to generate declining aggregate relative risk aversion. This leads to predictability of asset returns and high and persistent volatility. Stock market crashes may be observed if relative risk aversion differs strongly across investors. Then aggregate relative risk aversion may sharply increase given a small impairment in fundamentals so that asset prices may strongly decline. Changes in aggregate relative risk aversion may also lead to resistance and support levels as used in technical analysis. For numerical illustration we propose an analytical asset price formula.eng
dc.description.versionpublished
dc.format.mimetypeapplication/pdfdeu
dc.identifier.ppn263049469deu
dc.identifier.urihttp://kops.uni-konstanz.de/handle/123456789/12106
dc.language.isoengdeu
dc.legacy.dateIssued2007deu
dc.relation.ispartofseriesCoFE-Diskussionspapiere / Zentrum für Finanzen und Ökonometrie
dc.rightsterms-of-usedeu
dc.rights.urihttps://rightsstatements.org/page/InC/1.0/deu
dc.subjectAggregate relative risk aversiondeu
dc.subjectEquilibrium asset price processesdeu
dc.subjectReturn predictabilitydeu
dc.subjectStock market crashesdeu
dc.subjectExcess Volatilitydeu
dc.subject.ddc330deu
dc.subject.jelC12deu
dc.titleReturn Predictability and Stock Market Crashes in a Simple Rational Expectations Modeleng
dc.typeWORKINGPAPERdeu
dspace.entity.typePublication
kops.bibliographicInfo.seriesNumber2006/05deu
kops.citation.bibtex
@techreport{Franke2006Retur-12106,
  year={2006},
  series={CoFE-Diskussionspapiere / Zentrum für Finanzen und Ökonometrie},
  title={Return Predictability and Stock Market Crashes in a Simple Rational Expectations Model},
  number={2006/05},
  author={Franke, Günter and Lüders, Erik}
}
kops.citation.iso690FRANKE, Günter, Erik LÜDERS, 2006. Return Predictability and Stock Market Crashes in a Simple Rational Expectations Modeldeu
kops.citation.iso690FRANKE, Günter, Erik LÜDERS, 2006. Return Predictability and Stock Market Crashes in a Simple Rational Expectations Modeleng
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