Alvarez, FernandoJermann, Urban J2023-05-222023-05-222005-01-012016-06-17https://repository.upenn.edu/handle/20.500.14332/34351We derive a lower bound for the volatility of the permanent component of investors' marginal utility of wealth or, more generally, asset pricing kernels. The bound is based on return properties of long-term zero-coupon bonds, risk-free bonds, and other risky securities. We find the permanent component of the pricing kernel to be very volatile; its volatility is about at least as large as the volatility of the stochastic discount factor. A related measure for the transitory component suggest it to be considerably less important. We also show that, for many cases where the pricing kernel is a function of consumption, innovations to consumption need to have permanent effects.This is the peer reviewed version of the following article, which has been published in final form at http://dx.doi.org/10.1111/j.1468-0262.2005.00643.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.FinanceFinance and Financial ManagementArticle