Cyclical dynamics in idiosyncratic consumption risk
Thesis: S.M. in Management Research, Massachusetts Institute of Technology, Sloan School of Management, May, 2020
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| Format: | Thesis |
| Language: | eng |
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Massachusetts Institute of Technology
2020
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| Online Access: | https://hdl.handle.net/1721.1/126973 |
| _version_ | 1826189570995126272 |
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| author | Cole, Allison(Business management scientist) (Allison Taylor)Massachusetts Institute of Technology. |
| author2 | Jonathan A. Parker. |
| author_facet | Jonathan A. Parker. Cole, Allison(Business management scientist) (Allison Taylor)Massachusetts Institute of Technology. |
| author_sort | Cole, Allison(Business management scientist) (Allison Taylor)Massachusetts Institute of Technology. |
| collection | MIT |
| description | Thesis: S.M. in Management Research, Massachusetts Institute of Technology, Sloan School of Management, May, 2020 |
| first_indexed | 2024-09-23T08:18:03Z |
| format | Thesis |
| id | mit-1721.1/126973 |
| institution | Massachusetts Institute of Technology |
| language | eng |
| last_indexed | 2024-09-23T08:18:03Z |
| publishDate | 2020 |
| publisher | Massachusetts Institute of Technology |
| record_format | dspace |
| spelling | mit-1721.1/1269732023-09-21T13:31:39Z Cyclical dynamics in idiosyncratic consumption risk Cole, Allison(Business management scientist) (Allison Taylor)Massachusetts Institute of Technology. Jonathan A. Parker. Sloan School of Management. Sloan School of Management Sloan School of Management. Thesis: S.M. in Management Research, Massachusetts Institute of Technology, Sloan School of Management, May, 2020 Cataloged from the official PDF of thesis. Includes bibliographical references (pages 51-56). This paper examines cyclical dynamics of idiosyncratic consumption risk using consumption data from the Nielsen Consumer Panel and the Panel Study of Dynamic Income. With GMM estimates and supplemental graphical analysis, I show that the idiosyncratic risk in consumption is i) highly persistent, with an autocorrelation coefficient near unity ii) strongly countercyclical, with the conditional variance rising by an average of 25 percent from peak to trough. Compared to previous findings on income dynamics, I show that the variance of idiosyncratic consumption risk is also countercyclical, but less so. Moreover, I do not find that consumption risk displays procyclical skewness, as has been shown with income risk. Furthermore, in a simple asset-pricing framework, the estimated countercyclical cross-sectional variance of consumption raises the equity premium by 4.1 percent from the representative-agent case, using a risk aversion of only 10-15. by Allison Cole. S.M. in Management Research S.M.inManagementResearch Massachusetts Institute of Technology, Sloan School of Management 2020-09-03T16:46:22Z 2020-09-03T16:46:22Z 2020 2020 Thesis https://hdl.handle.net/1721.1/126973 1191221879 eng MIT theses may be protected by copyright. Please reuse MIT thesis content according to the MIT Libraries Permissions Policy, which is available through the URL provided. http://dspace.mit.edu/handle/1721.1/7582 112 pages application/pdf Massachusetts Institute of Technology |
| spellingShingle | Sloan School of Management. Cole, Allison(Business management scientist) (Allison Taylor)Massachusetts Institute of Technology. Cyclical dynamics in idiosyncratic consumption risk |
| title | Cyclical dynamics in idiosyncratic consumption risk |
| title_full | Cyclical dynamics in idiosyncratic consumption risk |
| title_fullStr | Cyclical dynamics in idiosyncratic consumption risk |
| title_full_unstemmed | Cyclical dynamics in idiosyncratic consumption risk |
| title_short | Cyclical dynamics in idiosyncratic consumption risk |
| title_sort | cyclical dynamics in idiosyncratic consumption risk |
| topic | Sloan School of Management. |
| url | https://hdl.handle.net/1721.1/126973 |
| work_keys_str_mv | AT coleallisonbusinessmanagementscientistallisontaylormassachusettsinstituteoftechnology cyclicaldynamicsinidiosyncraticconsumptionrisk |