Abstract:This paper tests the long run risk and valuation risk model using a robust estimation procedure. The persistent long run component of consumption growth process is proxied by a news based index that is created using a random forest algorithm. This news index is shown to predict aggregate long term consumption growth with an R-square of 57% and is robust to inclusion of other commonly used predictors. I theoretically derive an estimatable bias term in adjusted Euler equation of the model that arises due to meas… Show more
Set email alert for when this publication receives citations?
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.