Browsing by Subject "Asset pricing models"

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    Do CAPM results hold in a dynamic economy? a numerical analysis
    (Elsevier, 1997) Akdeniz, L.; Dechert, W. D.
    In this research we use the projection method (reported by Judd) to find numerical solutions to the Euler equations of a stochastic dynamic growth model. The model that we solve is Brock's asset pricing model for a variety of parameterizations of the production functions. Using simulated data from the model, conjectures (which are not analytically tractable) can be verified. We show that the market portfolio is mean-variance efficient in this dynamic context. We also show a result that is not available from the static CAPM theory: the efficient frontier shifts up and down over the business cycle.
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    The equity premium in Brock's asset pricing model
    (Elsevier, 2007) Akdeniz, L.; Dechert, W. D.
    In this paper we combine dynamic programming methods with projection methods for solving stochastic growth models. As an application of these methods, we solve Brock’s asset pricing model with a variety of parameterizations. We focused on finding parameterizations that result in an equity premium that is high relative to the variation in consumption. We show (both analytically and numerically) that the equity premium can be higher in a production based asset pricing model than it is in the consumption based asset pricing model, even when the real output level is the same in both models.