The Equity Premium in Consumption and Production Models?

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Author
Akdeniz, L.
Dechert, W. D.
Date Issued
2012-02-27
Journal Title
Macroeconomic Dynamics
Publisher
Cambridge University Press
Language
English
Type
Article
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Citation
Akdeniz, L., & Dechert, W. D. (2012). The Equity Premium in Consumption and Production Models. Macroeconomic Dynamics, 16(S1), 139-148.
Please cite this item using this persistent URL
http://hdl.handle.net/11693/12231
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.
Published as
http://dx.doi.org/10.1017/S1365100511000708
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