127hand1 - Parameter Variable Assumed: Mean consumption...

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Statistics that model parameters were chosen to replicate. Parameter Variable Value Assumed: Utility curvature Correlation between Δ d and Δ c Implied: Steady-state surplus consumption ratio Maximum surplus consumption ratio g σ r f φ γ σ ω ρ δ s S max P ARAMETER C HOICES TABLE 1: 1.89 1.50 0.94 0.87 2.00 11.2 0.2 0.89 0.057 0.094 Mean consumption growth (%) Standard deviation of consumption growth (%) Log risk-free rate (%) Persistence coefficient Standard deviation of dividend growth (%) Subjective discount factor Annualized values, e.g., 12g, 12 σ , 12r f , φ 12, and δ 12 , since the model is simulated at a monthly frequency. Statistic Postwar Sample Long Sample Means and Standard Deviations of Simulated and Historical Data TABLE 2: 1.72 3.32 2.92 0.22 3.90 Dividend Claim Consumption Claim 18.0 21.1 0.27 1.89 1.22 0.094 0.43 0.33 0.50 6.69 15.7 24.7 0.26 1.89 1.22 0.094 0.43 0.50 6.64 15.2 18.3 0.27 6.52 20.0 18.7 0.29 E( Δ c) σ ( Δ c) E(r - r f ) / σ (r - r f )
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This note was uploaded on 12/26/2011 for the course ECON 14.127 taught by Professor Staff during the Fall '10 term at MIT.

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127hand1 - Parameter Variable Assumed: Mean consumption...

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