NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Tao Jin

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Working Papers and Chapters and Reporter Articles

January 2016Rare Events and Long-Run Risks
with Robert J. Barro: w21871
Rare events (RE) and long-run risks (LRR) are complementary elements for understanding asset-pricing patterns, including the average equity premium and the volatility of equity returns. We construct a model with RE (temporary and permanent parts) and LRR (including stochastic volatility) and estimate this model with long-term data on aggregate consumption for 42 economies. RE typically associates with major historical episodes, such as the world wars and the Great Depression and analogous country- specific events. LRR reflects gradual and evolving processes that influence long-run growth rates and volatility. A match between the model and observed average rates of return requires a coefficient of relative risk aversion, γ, around 6. Most of the explanation for the equity premium derives fr...
August 2009On the Size Distribution of Macroeconomic Disasters
with Robert J. Barro: w15247
In the rare-disasters setting, a key determinant of the equity premium is the size distribution of macroeconomic disasters, gauged by proportionate declines in per capita consumption or GDP. The long-term national-accounts data for up to 36 countries provide a large sample of disaster events of magnitude 10% or more. For this sample, a power-law density provides a good fit to the distribution of the ratio of normal to disaster consumption or GDP. The key parameter of the size distribution is the upper-tail exponent, `alpha`, estimated to be near 5, with a 95% confidence interval between 3-1/2 and 7. The equity premium involves a race between `alpha` and the coefficie...

Published: Robert J. Barro & Tao Jin, 2011. "On the Size Distribution of Macroeconomic Disasters," Econometrica, Econometric Society, vol. 79(5), pages 1567-1589, 09. citation courtesy of

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
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