Using standard preferences for asset pricing has not been very successful to match asset price characteristics such as the risk-free interest rate, equity premium and the Sharpe ratio to time series data. Behavioral finance has recently proposed more realistic preferences such as preferences...

The attempt to match characteristics of asset pricing models such as the risk-free interest rate, equity premium and the Sharpe ratio for models with instantaneous consumption decisions in the context of stochastic growth models has not been very successful. Many recent versions of asset pricing...

The accuracy of the solution of dynamic general equilibrium models has become a major issue. Recent papers, in which second-order approximations have been substituted for first-order, indicate that this change may yield a significant improvement in accuracy. Second order approximations have been...

The study of asset price characteristics of stochastic growth models such as the risk-free interest rate, equity premium, and the Sharpe-ratio has been limited by the lack of global and accurate methods to solve dynamic optimization models. In this paper, a stochastic version of a dynamic...

Asset Prices, Booms and Recessions"" is a book on Financial Economics from a dynamic perspective. It focuses on the dynamic interaction of financial markets and economic activity. The financial markets to be studied here encompasses the money and bond market, credit market, stock market and...