Disasterization: A Tractable Way to Fix the Asset Pricing Properties of Macroeconomic Models
Publication information:
Gabaix. Disasterization: A Tractable Way to Fix the Asset Pricing Properties of Macroeconomic Models. American Economic Review, Papers and Proceedings. 2011;101(3):406–409.
Abstract
Take a production economy which has good business cycle properties: to fix its asset pricing properties (e.g. to have a high and volatile returns to equities), add disaster risk in the right places, i.e. "disasterize" this economy.