Finance Seminar with Marianne Andries, Toulouse School of Economics

The Department of Finance is proud to announce the upcoming seminar with Marianne Andries, Toulouse School of Economics.

Marianne Andries will present:

Horizon-Dependent Risk Aversion and the Timing and Pricing of Uncertainty

Authors:
Marianne Andries, Toulouse School of Economics
Thomas M. Eisenbach, Federal Reserve Bank of New York
Martin C. Schmalz, University of Michigan Stephen M. Ross School of Business

ABSTRACT
We propose a model that addresses two fundamental challenges concerning the timing and pricing of uncertainty: established equilibrium asset pricing models re- quire a controversial degree of preference for early resolution of uncertainty; and do not generate the downward-sloping term structure of risk premia suggested by the data. Inspired by experimental evidence, we construct dynamically inconsistent preferences in which risk aversion decreases with the temporal horizon. The resulting pricing model can generate a term structure of risk premia consistent with empirical evidence, without forcing a particular preference for resolution of uncertainty or compromising the ability to match standard moments.

Location:
Solbjerg Plads 3, 2000 Frederiksberg
Room: SPs13