The work of Easley, Kiefer, and Possen (1993) develops a stylized two-period model where households face uninsurable idiosyncratic risks
. Their findings suggest that, in general, when households face uninsurable risk in the returns to their human or physical capital, it is useful to tax the income from these factors and then rebate the proceeds via a lump-sum rebate.
Yet most would agree that these yields do not accurately reflect the idiosyncratic risks
that exist within a servicing portfolio.
For example, if investors are subject to large idiosyncratic risks
in their labor income and can share these risks only indirectly by trading a few assets such as stocks and Treasury bills, their individual consumption paths may be much more volatile than aggregate consumption.
(6.) See Kjetil Storesletten, Chris Telmer, and Amir Yaron, "Accounting for Idiosyncratic Risks
over the Life Cycle: Theory and Evidence," Carnegie-Mellon University, unpublished manuscript, 2000.
Campbell and Fisher study how producers' idiosyncratic risks
affect an industry's aggregate dynamics in an environment in which certainty equivalence fails.
We currently expect the favorable consumer backdrop to support healthy low-to-mid single-digit revenue growth across the US Leisure sector into 2019, notwithstanding company-specific idiosyncratic risks
Moody's has identified two idiosyncratic risks
which could affect the
Alternatively, the vega effect of ESOs provides CEOs with an incentive to engage in corporate activities that are associated with different types of risk, systematic and idiosyncratic risks
(Tian, 2004; Duan and Wei, 2005; Armstrong and Vashishtha, 2012).
Cat bonds represent idiosyncratic risks
, diversifiable at the world level.
One suggested explanation is that investors are concerned about idiosyncratic risks
to their labor income, such as the risk of a layoff, and are reluctant to hold assets that do poorly at times when idiosyncratic risks
. Further material growth in systemic risk, as