The equity premium in consumption and production models?
Dechert, W. D.
Cambridge University Press
139 - 148
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Please cite this item using this persistent URLhttp://hdl.handle.net/11693/12231
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.