Can a Time-to-Plan Model explain the Equity Premium Puzzle
AbstractThis paper proposes a quantitative evaluation of the time-to-plan technology in order to investigate up to which point this mechanism could constitute a satisfactory alternative to the well-known capital adjustment cost technology. We show that the time-to-plan mechanism reproduces a realistic risk-free rate, whilst being capable of generating a substantial equity premium. About the model's explanation of the business cycle, it turns out that the model predicts a perfectly positive and significant correlation between employment and output.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 7 (2005)
Issue (Month): 2 ()
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Other versions of this item:
- Beaubrun-Diant, Kevin, 2005. "Can a Time-to-Plan Model explain The Equity Premium Puzzle," Economics Papers from University Paris Dauphine 123456789/1862, Paris Dauphine University.
- G1 - Financial Economics - - General Financial Markets
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
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