Asset Pricing.

• Position: Bureau News

The NBER's Program on Asset Pricing met in Chicago on March 31. Program Director John H. Cochrane and Research Associate Lars P. Hansen, both of the University of Chicago, organized this agenda:

Luca Benzoni, University of Minnesota; Robert S. Goldstein, University of Minnesota and NBER; and Pierre Collin-Dufresne, University of California, Berkeley and NBER, "Can Standard Preferences Explain the Prices of Out-of-the-Money S&P 500 Put Options?"

Discussant: George Constantinides, University of Chicago and NBER

Riccardo Colacito and Mariano M. Croce, New York University, "Risk for the Long Run and the Real Exchange Rate"

Discussant: Adrien Verdelhan, Boston University

Ravi Jagannathan, Northwestern University and NBER; Alexey Malakhov, University of North Carolina; and Dmitry Novikov, Goldman Sachs, "Do Hot Hands Persist Among Hedge Fund Managers ? An Empirical Evaluation"

Discussant: David Hsieh, Duke University

Stavros Panageas and Jiangeng Yu, University of Pennsylvania, "Technological Growth, Asset Pricing, and Consumption Risk Over Long Horizons"

Discussant: Tano Santos, Columbia University and NBER

Torben G. Andersen, Northwestern University and NBER, and Luca Benzoni, "Can Bonds Hedge Volatility Risk in the U.S. Treasury Market? A Specification Test for Affine Term Structure Models"

Discussant: Jun Pan, HIT and NBER

Brad Barber and Ning Zhu, University of California, Davis, and Terrance Odean, University of California, Berkeley, "Do Noise Traders Move Markets ?"

Discussant: Sheridan Titman, University of Texas and NBER

Before the stock market crash of 1987, the Black-Scholes model implied that volatilities of S&P 500 index options were relatively constant. Since the crash, though, deep out-of-the money S&P 500 put options have become "expensive" relative to the Black-Scholes benchmark. Many researchers have argued that such prices cannot be justified in a general equilibrium setting if the representative agent has "standard preferences." However, Benzoni, Goldstein, and Collin-Dufresne demonstrate that the "volatility smirk" can be rationalized if the agent is endowed with Epstein-Zin preferences and if the aggregate dividend and consumption processes are driven by a persistent stochastic growth variable that can jump. They identify a realistic calibration of the model that simultaneously matches the empirical properties of dividends, the equity premium, the prices of both at-the-money and deep out-of-the-money puts, and the level of...