This paper develops a production based asset pricing model under the assumption of a stochastic discount rate. By solving Tobin's q explicitly, we first show that productivity shocks are the main source of the time-varying behavior of expected asset returns and then derive an equilibrium...

This paper develops a general equilibrium asset-pricing model that incorporates both production technology and consumption-smoothing behavior. It shows that technology and productivity shocks, labor input and capital stock are important factors in explaining the behavior of expected asset...