Variable Rare Disasters: An Exactly Solved Framework for Ten Puzzles in Macro-Finance

By Xavier Gabaix. 2012

951 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/d2c34ebc9fa0a739f55241553d9762dd4b1e368f

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Citations in the corpus

Disaster Resilience and Asset Prices (2020, positive): “The theoretical literature on disaster risk has also been extended to allow for learning (see, e.g.,Veronesi (2004), Wachter and Zhu (2019), Gillman et al. (2014), Lu and Siemer (2016)), and/or for stochastic disaster risk (see, e.g., Wachter (2013) and Gabaix (2012)).”
Do Managers Overreact to Salient Risks? Evidence from Hurricane Strikes (2017, result): “[2004, 2008], Kousky [2010]) 6 Other models based on the mechanism of salience include Bordalo, Gennaioli and Shleifer [2012a, 2013a], Gabaix [2011], Gennaioli and Shleifer [2010], Köszegi and Szeidl [2013], and Schwartzstein [2009].”
The Risk Premia Embedded in Index Options (2015, background): “…growth is subject to infrequent, but large, negative jumps (rare disasters) with a time-varying arrival rate, resembling the mechanism in Gabaix (2012).22 This type of equilibrium model can account for many critical empirical features such as the correlation between volatility and jump…”
The Long-Run Risks Model and Aggregate Asset Prices: An Empirical Assessment (2012, background): “…level of consumption that move consumption in relation to a moving average of its past values, while the rare disasters model of Rietz (1988) and Barro (2006, 2009), extended by Gabaix (2010) and Wachter (2011), emphasizes changes in the probability or severity of a large drop in consumption.”
In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis (2021, background): “Using the above calibration and the values B = 2/3, = 4 (Barro (2006), Gabaix (2012)), the elasticity in a disaster model given by (34) is ⇣r,D = 10, so that it is 50 times larger than the empirical one.”
Accruals and price crashes (2016, background): “At the market level, crash risk explains a significant fraction of the equity premium (Barro 2006; Gabaix 2012).”
Learning about Consumption Dynamics (2014, background): “For instance, Barro (2006, 2009), Barro and Ursua (2008), Barro et al. (2013), Backus, Chernov, and Martin (2011), and Gabaix (2009) use these models to study consumption disasters.”
Housing, Finance and the Macroeconomy (2014, critical): “This result contradicts implications of the papers of Campbell and Cochrane (1999), Bansal and Yaron (2004); Bansal, Kiku, and Yaron (2012) and Gabaix (2012) discussed earlier.”