Mean Reversion and Consumption Smoothing Export

@article{citeulike:215775, abstract = {Most models of the evolution of wealth and consumption assume that wealth volatility and risk premium are constant. But in fact, volatility declines, and risk premium seems to decline, as wealth rises. A model that allows mean reversion in the sense that the risk premium declines as wealth rises can help explain both the \"consumption smoothing puzzle\" and the \"equity premium puzzle.\" In an example of such a model that gives us an analytic solution, direct and derived risk aversion are both constant, but differ.}, author = {Black, Fischer}, citeulike-article-id = {215775}, citeulike-linkout-0 = {http://www.jstor.org/stable/2961960}, keywords = {asset\_pricing, mean\_reversion}, posted-at = {2005-06-01 16:47:07}, priority = {2}, title = {Mean Reversion and Consumption Smoothing}, url = {http://www.jstor.org/stable/2961960} }

TY - JOUR ID - citeulike:215775 L3 - citeulike-article-id:215775 N2 - Most models of the evolution of wealth and consumption assume that wealth volatility and risk premium are constant. But in fact, volatility declines, and risk premium seems to decline, as wealth rises. A model that allows mean reversion in the sense that the risk premium declines as wealth rises can help explain both the "consumption smoothing puzzle" and the "equity premium puzzle." In an example of such a model that gives us an analytic solution, direct and derived risk aversion are both constant, but differ. TI - Mean Reversion and Consumption Smoothing KW - asset_pricing KW - mean_reversion AU - Black, Fischer UR - http://www.jstor.org/stable/2961960 ER -