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Persistent link: https://www.econbiz.de/10005410944
We introduce two modifications into the standard real business cycles model: habit persistence preferences and limitations on intersectoral mobility. The resulting model is consistent with the observed mean equity premium, mean risk free rate and Sharpe ration on equity. With respect to the...
Persistent link: https://www.econbiz.de/10005520025
We examine asset prices and returns in the context of a version of the pure exchange economy studied in Lucas (1978) and Mehra and Prescott (1985). Our purpose is to identify the key channels by which changes in preferences affect the equity premium and the risk free rate and to develop...
Persistent link: https://www.econbiz.de/10005724369