Log-normal approximation of the equity premium in the production model
The conditional equity premium in the model with production is often approximated by assuming a jointly log-normal distribution of the marginal rate of substitution in consumption and the marginal productivity of capital. We show that, for standard parameterization, this premium is about one-third less than that implied by a nonlinear approximation of the Euler equations.
Year of publication: |
2012
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Authors: | Heer, Burkhard ; Maußner, Alfred |
Published in: |
Applied Economics Letters. - Taylor & Francis Journals, ISSN 1350-4851. - Vol. 19.2012, 5, p. 407-412
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Publisher: |
Taylor & Francis Journals |
Saved in:
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