Uncertainty Shocks, Asset Supply, and Pricing over the Business Cycle

2,720 views · Published 7 May 2013 · 34:03 · Indexed 6 November 2026

Channel: The University of Chicago · 2013 · Education

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Cosmin Ilut, Assistant Professor of Economics at Duke University, presents on a DSGE model with endogenous financial asset supply and ambiguity averse investors. An increase in uncertainty about financial conditions leads firms to substitute away from debt and reduce shareholder payout in bad times when measured risk premia are high. Regime shifts in volatility generate large low-frequency movements in asset prices due to uncertainty premia that are disconnected from the business cycle. This lecture is a part of the Workshop on Ambiguity and Robustness in Macroeconomics and Finance.

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