Term Structure of Discount Rates under Multivariate s-Ordered Consumption Growth
Résumé
The statistical relationship between future changes in consumption can be exploited to derive, under certain assumptions on investor preferences, an unambiguous e ect on the yield-curve shape of zero-coupon bonds, viz., the term structure of discount rates. Thus, an increase in concordance in uncertain consumption growth has a negative impact on the yield-curve slope if, and only if, the representative investor is correlation averse (Gollier, Pricing the future, to appear). Using multivariate ~s-concave stochastic orderings, this note generalizes this relationship to multivariate higher-order risk preferences. The result under concordance is included for bivariate (1,1)-concave orders. The e ect on the yield curve decreases absolutely with initial consumption for a given stochastic deterioration in the random addends to initial consumption. In an approximate representation of the interest rate for the univariate case, the e ects on the yield curve are controlled by the Ross coe cients of risk aversion.
absent