@techreport{NBERw8360,
 title = "The Size of the Permanent Component of Asset Pricing Kernels",
 author = "Fernando Alvarez and Urban J. Jermann",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "8360",
 year = "2001",
 month = "July",
 URL = "http://www.nber.org/papers/w8360",
 abstract = {We derive a lower bound for the size of the permanent component of asset pricing kernels. The bound is based on return properties of long-term zero-coupon bonds, risk-free bonds, and other risky securities. We find the permanent component of the pricing kernel to be very large; its volatility is about 100% of the volatility of the stochastic discount factor. This result implies that, if the pricing kernel is a function of consumption, innovations to consumption need to have permanent effects.},
}