Replication data for: Is the Volatility of the Market Price of Risk Due to Intermittent Portfolio Rebalancing?
Principal Investigator(s): View help for Principal Investigator(s) YiLi Chien; Harold Cole; Hanno Lustig
Version: View help for Version V1
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Project Citation:
Chien, YiLi, Cole, Harold, and Lustig, Hanno. Replication data for: Is the Volatility of the Market Price of Risk Due to Intermittent Portfolio Rebalancing? Nashville, TN: American Economic Association [publisher], 2012. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-12-06. https://doi.org/10.3886/E116108V1
Project Description
Summary:
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Our paper examines whether the failure of unsophisticated investors to rebalance their portfolios can help to explain the countercyclical volatility of aggregate risk compensation in financial markets. To answer this question, we set up a model in which a large mass of investors do not rebalance their portfolio shares in response to aggregate shocks, while a smaller mass of active investors do. We find that intermittent rebalancers more than double the effect of aggregate shocks on the time variation in risk premia by forcing active traders to sell more shares in good times and buy more shares in bad times. (JEL D14, E32, G11, G12)
Scope of Project
JEL Classification:
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D14 Household Saving; Personal Finance
E32 Business Fluctuations; Cycles
G11 Portfolio Choice; Investment Decisions
G12 Asset Pricing; Trading Volume; Bond Interest Rates
D14 Household Saving; Personal Finance
E32 Business Fluctuations; Cycles
G11 Portfolio Choice; Investment Decisions
G12 Asset Pricing; Trading Volume; Bond Interest Rates
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