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Use the given article
(http://www.nber.org/papers/w12248)and find the problem statement that the
article is trying to cover. Use 1 page to cover that then use the next page to
discuss the new policy implications or how has anything changed since this
article has been written.
When reading the article, there is no need to pay
attention to the given finance models. Focus more on the details and writing.
Review
Given Article. Find the Problem Statement and Policy Implications
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The article, “Risk,
Uncertainty and Asset Prices,” looks to the importance of changes
uncertainty and changes in risk aversion in the determination of assets pricing
and risk premiums. The article investigates the effects of equity premiums, the
conditional variability of equity returns, and price dividend ratio. The
article uses information on consumption growth and higher moments in dividend
as well as the conditional relationship between their volatility and other
several instruments. The articles points that in inflation with the interest of
confronting consumption models with data, it is critical to translate real
variables to nominal terms. In asset pricing the seeks to identify the exact
solutions that they can drive to get intuition for how long the the proposed
model can give an elaborate model better than the exsting one. The existing
models the scope of the previous studies did not give a wider and an elaborate
framework. The important step that the article first gets is having a pricing
model effective for real bonds, nominal bonds and lastly the final equity. The
most pressing issue that the paper sought to sort out is the relative
importance two competing hypotheses for the source of asset price variation and
the magnitude of asset prices. To address this, issue the literature presented
herein has firstly looked into the role of cash flow volatility changes and how
it acts as a determinant of equity premiums in either time series and cross
sectional. Secondly explored the shocks to the preference of investors as they
are the drivers of equity prices[1].
In addressing the problem arising from risk uncertainty and asset financing,
the article develops a theoretical model and an empirical strategy capable of
accommodating the explanations and seeking th implementation of an optimal GMM
estimation to determine relative importance of different approaches. The
article borrows ideas like the CAPM, which is basically predicting linear
positive relation between the anticipated excess returns in the market and the
market conditional variance.
A research titled, “Risk, Monetary Policy and Asset Prices in a Global World”...
