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Habit Persistence And Asset Returns In An Exchange Economy

Author

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  • BOLDRIN, MICHELE
  • CHRISTIANO, LAWRENCE J.
  • FISHER, JONAS D.M.

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.

Suggested Citation

  • Boldrin, Michele & Christiano, Lawrence J. & Fisher, Jonas D.M., 1997. "Habit Persistence And Asset Returns In An Exchange Economy," Macroeconomic Dynamics, Cambridge University Press, vol. 1(2), pages 312-332, June.
    • Handle: RePEc:cup:macdyn:v:1:y:1997:i:02:p:312-332_00
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