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Asset Pricing Lessons for Modeling Business Cycles

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Author Info

  • Boldrin, M.
  • Christiano, L.J.
  • Fischer, J.D.M.

Abstract

We develop a model which accounts for the observed equity premium and average risk free rate, without implying counterfactually high risk aversion. The model also does well in accounting for business cycle phenomena.

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Bibliographic Info

Paper provided by Banca Italia - Servizio di Studi in its series Papers with number 268.

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Length: 57 pages
Date of creation: 1996
Date of revision:
Handle: RePEc:fth:banita:268

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Postal: Banca d'Italia-Servizio Studi-Divisione Biblioteca e Pubblicazioni - Via N azionale, 91 -00184 Rome, Italy.
Web page: http://www.bancaditalia.it/
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Related research

Keywords: BUSINESS CYCLES; STOCK MARKET; RISK; INFORMATION; MODELS;

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References

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  7. Mankiw, N. Gregory, 1986. "The equity premium and the concentration of aggregate shocks," Journal of Financial Economics, Elsevier, vol. 17(1), pages 211-219, September.
  8. Nelson, Charles R & Startz, Richard, 1990. "The Distribution of the Instrumental Variables Estimator and Its t-Ratio When the Instrument Is a Poor One," The Journal of Business, University of Chicago Press, vol. 63(1), pages S125-40, January.
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  24. John H. Cochrane & Lars Peter Hansen, 1992. "Asset Pricing Explorations for Macroeconomics," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 115-182 National Bureau of Economic Research, Inc.
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  29. Benninga, Simon & Protopapadakis, Aris, 1990. "Leverage, time preference and the 'equity premium puzzle'," Journal of Monetary Economics, Elsevier, vol. 25(1), pages 49-58, January.
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  32. repec:fth:harver:1435 is not listed on IDEAS
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  35. Hercowitz, Z., 1992. "Macroeconomic Implication of Investment-Specific Technological Change," Papers 13-92, Tel Aviv - the Sackler Institute of Economic Studies.
  36. Constantinides, George M, 1990. "Habit Formation: A Resolution of the Equity Premium Puzzle," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 519-43, June.
  37. Judd, Kenneth L., 1992. "Projection methods for solving aggregate growth models," Journal of Economic Theory, Elsevier, vol. 58(2), pages 410-452, December.
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