Risk Aversion or Model Uncertainty? An Empirical Cross-Sectional Analysis Across Countries

dc.creatorAlmeida, Caio
dc.creatorEngel, Pedro
dc.creatorValente, Joao Paulo
dc.date2019-01-04
dc.date.accessioned2022-11-03T21:19:41Z
dc.date.available2022-11-03T21:19:41Z
dc.identifierhttps://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/76136
dc.identifier.urihttps://repositorioslatinoamericanos.uchile.cl/handle/2250/5048093
dc.descriptionBy analyzing a panel of macro data including both Emerging Markets (EM) and Advanced Economies (AE), we identify that an acceptable level of model uncertainty helps to explain the equity premium existing in all these markets. Model uncertainty aversion is in general higher for EMs than for AEs. In addition, the degree of cross-sectional heterogeneity across countries' estimates of model uncertainty aversion is smaller than the corresponding heterogeneity of the risk aversion estimates in a traditional CRRA preference. We also compute separate costs of model risk and uncertainty for these economies in terms of present consumption, and conclude that the most significant effects come from uncertainty.en-US
dc.formatapplication/pdf
dc.languageeng
dc.publisherSociedade Brasileira de Econometriaen-US
dc.relationhttps://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/76136/74746
dc.rightsCopyright (c) 2019 Brazilian Review of Econometricspt-BR
dc.sourceBrazilian Review of Econometrics; Vol. 38 No. 2 (2018); 321-355en-US
dc.sourceBrazilian Review of Econometrics; v. 38 n. 2 (2018); 321-355pt-BR
dc.source1980-2447
dc.subjectRisk aversionen-US
dc.subjectModel Uncertaintyen-US
dc.subjectEquity premium puzzleen-US
dc.subjectDetection error probabilityen-US
dc.subjectC5en-US
dc.subjectC13en-US
dc.subjectC14en-US
dc.titleRisk Aversion or Model Uncertainty? An Empirical Cross-Sectional Analysis Across Countriesen-US
dc.typeinfo:eu-repo/semantics/article
dc.typeinfo:eu-repo/semantics/publishedVersion


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