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This dissertation consists of three essays studying topics in financial economicsthrough the lens of quantitative models. In particular, I provide three examples of the effective use of data in the disciplining of financial economics models. In the first essay, I provide evidence of a significant transitory component of aggregate equity payout. Leading asset

This dissertation consists of three essays studying topics in financial economicsthrough the lens of quantitative models. In particular, I provide three examples of the effective use of data in the disciplining of financial economics models. In the first essay, I provide evidence of a significant transitory component of aggregate equity payout. Leading asset pricing models assume exogenous dividend growth processes which are inconsistent with this fact. I find that imposing market clearing for consumption and income in these models induces the relevant behaviors in dividend growth, even when dividend growth is obtained indirectly. In the second essay, I provide a novel decomposition of the unconditional equity risk premium. In the data, the majority of the equity premium is attributable to moderate left tail risks, not those associated with disaster states. In stark contrast to the data, leading asset pricing models do not predict that this intermediate left tail region meaningfully contributes to the equity premium. The shortcomings of the models can be pinned on unreasonably low prices of risk for tail events relative to the data. In the third essay, I document a large dispersion in household allocations to risky assets conditional on age. I show that while standard household portfolio choice models can be made to match the average risky share over the lifecycle, the models fall short of generating sufficient heterogeneity in the cross-section of household portfolios.
ContributorsBeason, Tyler (Author) / Mehra, Rajnish (Thesis advisor) / Wahal, Sunil (Thesis advisor) / Pruitt, Seth (Committee member) / Schreindorfer, David (Committee member) / Arizona State University (Publisher)
Created2021