THE EQUITY PREMIUM IN CONSUMPTION AND PRODUCTION MODELS
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 <italic>exceeds</italic> that of the consumption-based model with probability 1.
Year of publication: |
2012
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Authors: | Akdeniz, Levent ; Dechert, W. Davis |
Published in: |
Macroeconomic Dynamics. - Cambridge University Press. - Vol. 16.2012, S1, p. 139-148
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Publisher: |
Cambridge University Press |
Description of contents: | Abstract [journals.cambridge.org] |
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