The Equity Premium in Consumption and Production Models?
Dechert, W. D.
Please cite this item using this persistent URLhttp://hdl.handle.net/11693/12231
- Department of Management 
Cambridge University Press
In this paper we use a simple model with a single Cobb–Douglas firm and a consumer with a CRRA utility function to show the difference between the equity premia in the production-based Brock model and the consumption-based Lucas model. With this simple example we show that the equity premium in the production-based model exceeds that of the consumption-based model with probability 1.
Akdeniz, L., & Dechert, W. D. (2012). The Equity Premium in Consumption and Production Models. Macroeconomic Dynamics, 16(S1), 139-148.