COMPARATIVE ANALYSIS OF THE LEADING CONSUMPTIONBASED ASSET PRICING MODELS Cover Image

COMPARATIVE ANALYSIS OF THE LEADING CONSUMPTIONBASED ASSET PRICING MODELS
COMPARATIVE ANALYSIS OF THE LEADING CONSUMPTIONBASED ASSET PRICING MODELS

Author(s): Stoyan Prodanov, Tsvetan Pavlov
Subject(s): Economy, Financial Markets
Published by: Стопанска академия »Д. А. Ценов«
Keywords: consumption-based asset pricing models;recursive preferences;long-run risk;heterogeneous consumers;equity risk premium

Summary/Abstract: The article analyzes in depth the consumption-based assetpricing models, and displays most perspective contemporary trends in thefield. A conceptual framework of models has been originally presented linkingmacroeconomic and financial relationships, and mathematical basis of theclassic CCAPM has been developed. The paper also brings out the leadingapproaches for modification of the basic model, overcoming some of itsshortcomings, and analyzes the advantages, disadvantages and the ability ofconsumption-based modern models to recreate empirical correlations in profitabilityand the risk of financial assets. The leading conclusion of the articleis that there is still no convincing rational consensus model to reproduce adequatelythe characteristics of financial markets. From an econometric perspective,the closest in this endeavour is the model of long-term risk of Bansaland Yaron (2004) and its modifications.

  • Issue Year: 2016
  • Issue No: 1
  • Page Range: 20-46
  • Page Count: 27
  • Language: English