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 language | English (US) |
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Pages (from-to) | 312-332 |
Number of pages | 21 |
Journal | Macroeconomic Dynamics |
Volume | 1 |
Issue number | 2 |
DOIs | |
State | Published - 1997 |
Keywords
- Asset Pricing
- Capital Gains
- Habit Persistence
- Risk Aversion
ASJC Scopus subject areas
- Economics and Econometrics