We explore the consequences for asset pricing of admitting a bequest motive into an otherwise standard overlapping generations model where agents trade equity and perpetual debt securities. Prices of securities are seen to be approximately 50% higher in an economy with bequests as compared to an...

We present evidence that the equity premium and the premium of value stocks over growth stocks are explained in the 1982 1996 period with a stochastic discount factor (SDF) calculated as the weighted average of individual households' marginal rate of substitution with low and economically...

Several empirical regularities in the prices of financial assets are at odds with the predictions of standard economic theory. I address these regularities and explore the extent to which they are resolved in the context of two markets organized in very different ways. The first setting is a...

Ongoing questions on the historical mean and standard deviation of the return on equities and bonds and on the equilibrium demand for these securities are addressed in the context of a stationary, overlapping-generations economy in which consumers are subject to a borrowing constraint. The key...

Proposals that portion of the Social Security Trust Fund assets be invested in equities entail the possibility that a severe decline in equity prices renders the Fund assets insufficient to provide the currently mandated level of benefits. In this event, existing taxpayers may be compelled to...

Analytic bounds on the reservation write price of European-style contingent claims are derived in the presence of proportional transaction costs in a model which allows for intermediate trading. The option prices are obtained via a utility maximization approach by comparing the maximized...