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Political Uncertainty and the Risk Premia

 

 

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Event Title: 22nd Annual Utah Winter Finance Conference, February 9-11, 2012
Presentation Title: Political Uncertainty and the Risk Premia
Presenters, Panelists and Guests:

Lubos Pastor (Chicago),
Pietro Veronesi (Chicago)

Description:

ABSTRACT:
We study the pricing of political uncertainty in a general equilibrium model of government policy choice. The model implies that political uncertainty com- mands a risk premium whose magnitude is larger in weaker economic conditions. Political uncertainty reduces the value of the implicit put protection that the government provides to the market. It also makes stocks more volatile and more correlated, especially when the economy is weak. We find empirical evidence consistent with these predictions. We also show that government policies cannot be judged by the stock market response to their announcement.

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Host Organization: David Eccles School of Business, Department of Finance, The University of Utah
 
Original Presentation Date (USA): Friday, 10 February 2012
Presentation Start Time: 08:30 am MST | 15:30 GMT
Duration: 28min : 28sec
 
For More Information: Conference Schedule of Events
David Eccles School of Business, Department of Finance, The University of Utah
Presentation Host:

Conference Organizers:
Avner Kalay, Professor, Dept. of Finance, The University of Utah
James Schallheim , Professor, Dept. of Finance, The University of Utah

 
Copyright: 2012 Utah Winter Finance Conference, Dept. of Finance, The University of Utah
Use Restrictions: Unless specifically exempted, the reproduction, re-purposing, or re-distribution of materials found, contained, or provided via this program event is prohibited. Prior written consent is required for use of any images or material.
Primary Language: English