TY  - JOUR
AU  - Borovička,Jaroslav
AU  - Hansen,Lars Peter
AU  - Hendricks,Mark
AU  - Scheinkman,José A.
TI  - Risk Price Dynamics
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15506
PY  - 2009
Y2  - November 2009
UR  - http://www.nber.org/papers/w15506
L1  - http://www.nber.org/papers/w15506.pdf
N1  - Author contact info:
Jaroslav Borovicka
Department of Economics
New York University
New York, NY  10012
E-Mail: jaroslav.borovicka@nyu.edu

Lars P. Hansen
Department of Economics
The University of Chicago
1126 East 59th Street
Chicago, IL 60637
Tel: 773/702-8170
Fax: 773/702-8490
E-Mail: lhansen@uchicago.edu

Mark Hendricks
Department of Economics
University of Chicago
1126 East 59th Street
Chicago, IL 60637
E-Mail: hendricks@uchicago.edu

Jose A. Scheinkman
Department of Economics
Princeton University
Princeton, NJ  08544-1021
Tel: 609/258-4020
Fax: 609/258-0771
E-Mail: joses@princeton.edu
AB  - We present a novel approach to depicting asset pricing dynamics by characterizing shock exposures and prices for alternative investment horizons. We quantify the shock exposures in terms of elasticities that measure the impact of a current shock on future cash-flow growth.  The elasticities are designed to accommodate nonlinearities in the stochastic evolution modeled as a Markov process. Stochastic growth in the underlying macroeconomy and stochastic discounting in the representation of  asset values are central ingredients in our investigation. We provide elasticity calculations in a series of examples featuring consumption externalities, recursive utility, and jump risk.
ER  -