Identifying Long-Run Risks: A Bayesian Mixed-Frequency Approach

  title={Identifying Long-Run Risks: A Bayesian Mixed-Frequency Approach},
  author={Frank Schorfheide and Dongho Song and Amir Yaron},
  journal={Capital Markets: Asset Pricing \& Valuation eJournal},
We develop a nonlinear state-space model that captures the joint dynamics of consumption, dividend growth, and asset returns. Building on Bansal and Yaron (2004), our model consists of an economy containing a common predictable component for consumption and dividend growth and multiple stochastic volatility processes. The estimation is based on annual consumption data from 1929 to 1959, monthly consumption data after 1959, and monthly asset return data throughout. We maximize the span of the… Expand
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