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      The equity premium in consumption and production models?

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      Author
      Akdeniz, L.
      Dechert, W. D.
      Date
      2012-02-27
      Source Title
      Macroeconomic Dynamics
      Print ISSN
      1365-1005
      Publisher
      Cambridge University Press
      Volume
      16
      Issue
      1
      Pages
      139 - 148
      Language
      English
      Type
      Article
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      Abstract
      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.
      Keywords
      Computational economics
      Projection methods
      Asset pricing models, stochastic growth models.
      Permalink
      http://hdl.handle.net/11693/12231
      Published Version (Please cite this version)
      http://dx.doi.org/10.1017/S1365100511000708
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      • Department of Management 566
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