Show simple item record

dc.contributor.authorCosta, Carlos Eugênio da
dc.contributor.authorVasconcelos, Jivago B. Ximenes de
dc.date.accessioned2009-05-12T13:10:32Z
dc.date.accessioned2010-09-23T18:56:53Z
dc.date.available2009-05-12T13:10:32Z
dc.date.available2010-09-23T18:56:53Z
dc.date.issued2009-05-12
dc.identifier.issn0104-8910
dc.identifier.urihttp://hdl.handle.net/10438/2610
dc.description.abstractVerdelhan (2009) shows that if one is to explain the foreign exchange forward premium behavior using Campbell and Cochrane (1999)’s habit formation model one must specify it in such a way to generate pro-cyclical short term risk free rates. At the calibration procedure, we show that this is only possible in Campbell and Cochrane’s framework under implausible parameters specifications given that the price-consumption ratio diverges in almost all parameters sets. We, then, adopt Verdelhan’s shortcut of fixing the sensivity function λ(st) at its steady state level to attain a finite value for the price-consumption ratio and release it in the simulation stage to ensure pro-cyclical risk free rates. Beyond the potential inconsistencies that such procedure may generate, as suggested by Wachter (2006), with procyclical risk free rates the model generates a downward sloped real yield curve, which is at odds with the data.eng
dc.language.isoeng
dc.publisherFundação Getulio Vargas. Escola de Pós-graduação em Economiapor
dc.relation.ispartofseriesEnsaios Econômicos;692por
dc.subjectForward premiumpor
dc.subjectHabit formationpor
dc.subjectAsset pricingpor
dc.subjectPuzzlepor
dc.subjectEquity premium puzzlepor
dc.titleCan a habit formation model really explain the forward premium anomaly?eng
dc.typeWorking Papereng
dc.subject.areaEconomiapor
dc.contributor.unidadefgvEscolas::EPGEpor
dc.subject.bibliodataCiclos econômicospor
dc.subject.bibliodataEconomiapor
dc.contributor.affiliationFGV


Files in this item

Thumbnail

This item appears in the following Collection(s)

Show simple item record