Learning asymmetries in real business cycles

Nieuwerburgh, Stijn Van; Veldkamp, Laura

doi:10.1016/j.jmoneco.2005.02.003

Cited by 322 publications

(180 citation statements)

References 28 publications

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“…In a business cycle model, there is good reason to focus on a stagnation as a high-uncertainty time. Work done by Chamley and Gale (1994), Veronesi (1999), and Van Nieuwerburgh and Veldkamp (2003) suggests that there is more uncertainty when emerging from a recession and this can restrain the recovery. These predictions, as well as accompanying empirical evidence suggest that heterogeneous information effects might contribute to business cycle asymmetry.…”

Section: Discussionmentioning

confidence: 99%

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Uncertainty, policy ineffectiveness and long stagnation of the macroeconomy

Veldkamp

2006

Japan and the World Economy

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When reform has no direct aggregate effects, but only changes agents' incentives to act, uncertainty can weaken its effect. Because agents learn about policy change by observing their signals, increasing signal noise makes it harder for agents to know that reform has occurred. When policy changes are difficult to observe, they change agents' actions less and have less aggregate effect. This is the main point illustrated in the model by Aoki and Yoshikawa.

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Section: Discussionmentioning

confidence: 99%

“…To highlight the model's mechanism, I will examine the origin of the transition rates put forward in equations (4) and (5). What are the decisions agents are making that cause this fraction of them to choose high or low output each period?…”

Section: Key Features Of the Modelmentioning

confidence: 99%

Uncertainty, policy ineffectiveness and long stagnation of the macroeconomy

Veldkamp

2006

Japan and the World Economy

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“…We interpret this cost to be a social cost in terms of research costs borne by social institutions (e.g Treasury and the Federal Reserve Bank) to gather information about the underlying state of the economy. An alternative interpretation is presented in Veldkamp (2006) who argues that these costs may be related to media costs (such as hiring a journalist) to gather information about economy. For analytical tractability, we make ξ t proportional to the aggregate income:…”

Section: Social Planner Problemmentioning

confidence: 99%

“…However, to deliver jumps in the asset-prices, such specifications require exogenous jumps in the inputs of the economy (endowment process), as shown in Liu et al (2005) and . On the other hand, our approach complements the approach taken in Veldkamp (2006b) and Van Nieuwerburgh and Veldkamp (2006), where information is endogenous and varies with the state in the economy. For example, in Veldkamp (2006b) the impact of bad news can be endogenously very large in good times when the information is abundant, so that asset prices move sharply.…”

Section: Risk Compensation and Asset Pricesmentioning

confidence: 99%

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Learning and Asset-price Jumps

Bansal

Shaliastovich

2011

Rev. Financ. Stud.

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We develop a general equilibrium model in which income and dividends are smooth but asset prices contain large moves (jumps). These large price jumps are triggered by optimal decisions of investors to learn the unobserved state. We show that learning choice is determined by preference parameters and the conditional volatility of income process. An important model prediction is that income volatility predicts future jump periods, while income growth does not. Consistent with the model, large moves in returns in the data are predicted by consumption volatility but not by consumption growth. The model quantitatively captures these novel features of the data. 1 Learning and Asset-Price Jumps AbstractWe develop a general equilibrium model in which income and dividends are smooth, but asset prices are subject to large moves (jumps). A prominent feature of the model is that the optimal decision of investors to learn the unobserved state triggers large asset-price jumps. We show that the learning choice is critically determined by preference parameters and the conditional volatility of income process. An important prediction of the model is that the conditional volatility of income predicts future jump periods, while the level of income growth does not. We find that indeed in the data large moves in returns are predicted by consumption volatility, but not by the changes in consumption level. We show that the model can quantitatively capture these novel features of the data.

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Does maturity matter? The case of treasury futures volume

Chichernea

Huang

Petkevich

2019

Journal of Futures Markets

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We find that Treasury futures volume contains information about future economic and financial market conditions. Short‐ and long‐term volumes are economically different: A relatively higher volume in short‐term (long‐term) Treasury futures is counter‐cyclical (procyclical), preceding worse (better) economic and financial conditions. Further, we construct a single factor from futures volumes of different maturities that forecasts the performances of Treasury securities and the corporate debt and equity markets, as well as macroeconomic conditions. Our results are consistent with the notion that futures volumes from different market segments reflect differences in beliefs and contain different information about future financial and economic activity.

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Learning asymmetries in real business cycles

Cited by 322 publications

References 28 publications

Uncertainty, policy ineffectiveness and long stagnation of the macroeconomy

Uncertainty, policy ineffectiveness and long stagnation of the macroeconomy

Learning and Asset-price Jumps

Does maturity matter? The case of treasury futures volume

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