Previous equilibrium "business cycle" models are extended by the incorporation of an economy-wide capital market. One aspect of this ex-tension is that the relative price that appears in commodity supply and demand functions becomes an anticipated real rate of return on earning assets, rather...

The risk premium puzzle is even worse than previously reported if housing is also taken into consideration next to equity. While housing premia are only moderately smaller than equity premia, they are significantly less volatile and the Sharpe ratio of housing is significantly larger. Hence,...

We describe a tractable way to jointly study macroeconomic quantities, welfare and asset prices in real business cycle models featuring affine structure of shocks and Epstein-Zin-Weil preferences. Our solution is analytical, log-linearized and adjusted for risk by exploiting log-normality....

This paper considers the business cycle, asset pricing, and welfare effects of increased risk aversion, while holding intertemporal substitution preferences constant. I show that increasing risk aversion does not significantly affect the relative variabilities and co-movements of aggregate...