Title-1: Smooth Ambiguity, Learning and Asset Prices in a Model with Heterogeneous Agents
Title -2: Guidelines for handling review comments in English journals
Rapporteur: Liu Herning (Professor, University of Manchester, UK)
Time: 16:00 PM Friday, December 29, 2023
Tencent Conference: 870-373-552
Venue: B419, School of Economics and Management
Rapporteur Profile:
Liu Herning, male, Chair Professor of Finance, Alliance Business School, University of Manchester, U.K. His main research areas include asset pricing, macrofinance, portfolio, and financial measurement.
His work has been published in leading journals in financial economics such as Review of Financial Studies, Journal of Monetary Economics, Journal of Econometrics, Journal of Financial and Quantitative Analysis, Management Science, etc. He has also served as a member of the Board of Directors of the American Economic Review, Journal of Political Economy, Review of Financial Studies, Management Science, Journal, etc. He has also served as a reviewer for America Economic Review, Journal of Political Economy, Review of Financial Studies, Management Science, Journal of Financial and Quantitative Analysis, and Economic Modulation. He also serves as a reviewer for American Economic Review, Journal of Political Economy, Review of Financial Studies, Management Science, Journal of Financial and Quantitative Analysis, and as an associate editor for Economic Modelling.
Report Brief:
We study a class of heterogeneous-agent endowment economies with long run risks in which the persistent component in the aggregate consumption growth process is unobservable. Agents holding different beliefs regarding the persistent component engage in Bayesian learning. Agents are averse to uncertainty arising from state estimation and have generalized recursive smooth ambiguity preferences. By examining a two-agent model with an elasticity of intertemporal substitution above 1 and reasonable risk aversion, we find that: 1) under recursive preferences without ambiguity aversion, the consumption share of the agent with the correct belief dominates in the long run, 2)smooth ambiguity, in conjunction with state uncertainty, generatesuncertainty sharingmotive that leads to long-run survival of both agents, and 3) the time-varying welfare weights of agents and their posterior beliefs well explain the time variation of price-dividend ratios in the data. We also examine long-run survival outcomes for alternative values of preference parameters as well as the case in which agents differ in their degrees of ambiguity aversion.
All students and faculty are welcome to participate in the forum and exchange ideas!
Organizer:
Department of Finance, School of Economics and Management, China University of Mining and Technology
Department of Applied Economics, China University of Mining and Technology
Green Finance Research Center, China University of Mining and Technology
New Finance Teaching and Research Team, China University of Mining and Technology
December 26, 2023
