| Publications [#339265] of Ravi Bansal
Journal Articles
- Ai, H; Bansal, R, Risk Preferences and the Macroeconomic Announcement Premium,
Econometrica, vol. 86 no. 4
(January, 2018),
pp. 1383-1430, The Econometric Society [doi]
(last updated on 2024/04/19)
Abstract: This paper develops a revealed preference theory for the equity premium around macroeconomic announcements. Stock returns realized around pre-scheduled macroeconomic announcements, such as the employment report and the FOMC statements, account for 55% of the market equity premium. We provide a characterization theorem for the set of intertemporal preferences that generates a nonnegative announcement premium. Our theory establishes that the announcement premium identifies a significant deviation from time-separable expected utility and provides asset-market-based evidence for a large class of non-expected utility models. We also provide conditions under which asset prices may rise prior to some macroeconomic announcements and exhibit a pre-announcement drift.
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