Equilibrium asset pricing in directed networks

Autori

• Nicole Branger

Parametri

• Economia e affari
• Discussion paper / Deutsche Bundesbank; Eurosystem

Maggiori informazioni sul libro

Directed links in cash flow networks affect the cross-section of price exposures and market prices of risk in equilibrium. In an asset pricing model featuring mutually exciting jumps, we measure directedness through an asset's shock propagation capacity (spc). In the model, we prove: (i) Cash flow shocks of high spc assets command high market prices of risk, (ii) the price reaction of an asset to its own cash flow shocks is less pronounced for high spc assets. To illustrate our theoretical findings, we estimate an empirical network from industry cash flows and find support for these predictions.

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Lingua: Inglese

Pubblicato: 2018