Habit persistence and asset returns in an exchange economy

Michele Boldrin, Lawrence J. Christiano, Jonas D.M. Fisher*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

34 Scopus citations

Abstract

We examine asset prices and returns in the context of a pure exchange economy. 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 intuition that is useful for understanding asset pricing in more complicated economies. Our analysis suggests that capital gains play a crucial role in generating empirically plausible mean equity premia.

Original languageEnglish (US)
Pages (from-to)312-332
Number of pages21
JournalMacroeconomic Dynamics
Volume1
Issue number2
DOIs
StatePublished - 1997

Keywords

  • Asset Pricing
  • Capital Gains
  • Habit Persistence
  • Risk Aversion

ASJC Scopus subject areas

  • Economics and Econometrics

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