Financial Uncertainty with Ambiguity and Learning

We examine a production-based asset pricing model with regime-switching productivity growth, learning and ambiguity. Both mean and volatility of the growth rate of productivity are assumed to follow a Markov chain with an unobservable state. The agent's preferences are characterized by the generalized recursive smooth ambiguity utility function.

Our calibrated benchmark model with modest risk aversion can match moments of the variance risk premium in the data and reconcile empirical relations between the risk-neutral variance and macroeconomic quantities and their volatilities respectively.

We show that the interplay between productivity volatility risk and ambiguity aversion is important for pricing variance risk in returns.

劉赫甯教授主要研究資産定價、宏觀金融、投資組合選擇、金融計量學, 其多篇論文發表在經濟學、金融學頂級期刊如Journal Monetary Economics, Review of Financial Studies, Journal of Financial and Quantitative Analysis.