TY - JOUR
T1 - A generalized volatility bound for dynamic economies
AU - Otrok, Christopher
AU - Ravikumar, B.
AU - Whiteman, Charles H.
N1 - Funding Information:
We gratefully acknowledge the support provided for this research by the National Science Foundation under Grants SES-0082237 and SES-0082230. Otrok also thanks the Bankard Fund for Political Economy for financial support. We are grateful for comments by Erzo Luttmer and Tim Cogley; they helped shape our thinking on this project. We also thank seminar participants at the Federal Reserve Banks of Atlanta, Minneapolis and Richmond, Yale University, the University of Pittsburgh, the University of Quebec-Montreal, Iowa State University, and the Society for Economic Dynamics meetings in 2001.
Copyright:
Copyright 2007 Elsevier B.V., All rights reserved.
PY - 2007/11
Y1 - 2007/11
N2 - We develop a generalization of the Hansen-Jagannathan (1991) volatility bound that (i) incorporates the serial correlation properties of return data and (ii) allows us to calculate a spectral version of the bound. This generalization enables us to judge whether models match important aspects of the data in the long run, at business cycle frequencies, seasonal frequencies, etc. Our bound permits evaluation of models without requiring their explicit solution in a way that respects the dynamic implications of the fundamental component of the models, namely, the Euler equation that links asset returns to the intertemporal marginal rate of substitution.
AB - We develop a generalization of the Hansen-Jagannathan (1991) volatility bound that (i) incorporates the serial correlation properties of return data and (ii) allows us to calculate a spectral version of the bound. This generalization enables us to judge whether models match important aspects of the data in the long run, at business cycle frequencies, seasonal frequencies, etc. Our bound permits evaluation of models without requiring their explicit solution in a way that respects the dynamic implications of the fundamental component of the models, namely, the Euler equation that links asset returns to the intertemporal marginal rate of substitution.
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U2 - 10.1016/j.jmoneco.2007.06.028
DO - 10.1016/j.jmoneco.2007.06.028
M3 - Article
AN - SCOPUS:36048949599
VL - 54
SP - 2269
EP - 2290
JO - Carnegie-Rochester Confer. Series on Public Policy
JF - Carnegie-Rochester Confer. Series on Public Policy
SN - 0304-3932
IS - 8
ER -