Paul Ehling

Zhanhui, Chen; Ehling, Paul & Xiouros, Costas (2020)

Risk Aversion Sensitive Real Business Cycles

Management science Doi: 10.1287/mnsc.2019.3561

Zhanhui, Chen; Cooper, Ilan, Ehling, Paul & Xiouros, Costas (2020)

Risk Aversion Sensitive Real Business Cycles

Management science Doi: 10.1287/mnsc.2019.3561

Technology choice allows for substitution of production across states of nature and depends on state-dependent risk aversion. In equilibrium, endogenous technology choice can counter a persistent negative productivity shock with an increase in investment. An increase in risk aversion intensifies transformation across states, which directly leads to higher investment volatility. In our model and the data, the conditional volatility of investment correlates negatively with the price-dividend ratio and predicts excess stock market returns. In addition, the same mechanism generates predictability of consumption growth and produces fluctuations in the risk-free rate

Ehling, Paul; Gallmeyer, Michael, Heyerdahl-Larsen, Christian & Illeditsch, Philipp (2018)

Disagreement about Inflation and the Yield Curve

Journal of Financial Economics, 127(3), s. 459- 484. Doi: 10.1016/j.jfineco.2018.01.001

Ehling, Paul; Gallmeyer, Michael, Srivastava, Sanjay, Tompaidis, Stathis & Yang, Chunyu (2018)

Portfolio Tax Trading with Carryover Losses

Management science, 64(9), s. 4157- 4176. Doi: 10.1287/mnsc.2017.2733 - Full text in research archive

We study portfolio choice with multiple stocks and capital gain taxation assuming that capital losses can only offset current or future realized capital gains. We show, through backtesting using empirical distributions, that optimal equity holdings over an extended period are significantly lower on average than benchmark holdings suggested in the literature. Using Value and Growth or Small and Large portfolios, the backtests show that allocations remain persistently under-diversified. Carry-over losses have large economic significance since they can dramatically shrink the no-trade region. Finally, the backtested economic cost of incorrectly modeling capital losses is at least 8 percent of lifetime wealth.

Ehling, Paul; Graniero, Alessandro & Heyerdahl-Larsen, Christian (2018)

Asset prices and portfolio choice with learning from experience

Review of Economic Studies, 85(3), s. 1752- 1780. Doi: 10.1093/restud/rdx077 - Full text in research archive

We study asset prices and portfolio choice with overlapping generations, where the young disregard history to learn from own experience. Disregarding history implies less precise estimates of output growth, which in equilibrium leads the young to increase their investment in risky assets after positive returns, that is, they act as trend chasers. In equilibrium, the risk premium decreases after a positive shock and, therefore, trend chasing young agents lose wealth relative to old agents who behave as contrarians. Consistent with findings from survey data, the average belief about the risk premium in the economy relates negatively to future excess returns and is smoother than the true risk premium.

Xiouros, Costas & Ehling, Paul (2021)

Dissecting beta

[Academic lecture]. Computational and Financial Econometrics (CFE 2021).

Xiouros, Costas; Ehling, Paul, Cooper, Ilan & Zhanhui, Chen (2019)

Risk Aversion Sensitive Real Business Cycles

[Report]. BI Center of Asset Pricing Research.

Graniero, Alessandro; Ehling, Paul & Heyerdahl-Larsen, Christian (2016)

Asset Prices and Portfolio Choice with Learning from Experience

[Report]. Handelshøyskolen BI.

Yang, Chunyu; Ehling, Paul, Tompaidis, Stathis, Gallmeyer, Michael & Srivastava, Sanjay (2016)

Portfolio Tax Trading with Carry-Over Losses

[Academic lecture]. Academic Seminar.

Yang, Chunyu; Ehling, Paul, Tompaidis, Stathis, Gallmeyer, Michael & Srivastava, Sanjay (2015)

Portfolio Choice with Capital Gain Taxation and the Limited Use of Losses

[Academic lecture]. American Finance Association Annual Meeting 2015.