The equity premium in consumption and production models?

Date
2012-02-27
Authors
Akdeniz, L.
Dechert, W. D.
Advisor
Supervisor
Co-Advisor
Co-Supervisor
Instructor
Source Title
Macroeconomic Dynamics
Print ISSN
1365-1005
Electronic ISSN
Publisher
Cambridge University Press
Volume
16
Issue
1
Pages
139 - 148
Language
English
Type
Article
Journal Title
Journal ISSN
Volume Title
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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.

Course
Other identifiers
Book Title
Keywords
Computational economics, Projection methods, Asset pricing models, stochastic growth models.
Citation
Published Version (Please cite this version)