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Long-run productivity risk: A new hope for production-based asset pricing?

Listed author(s):
  • Massimiliano Croce, Mariano
Registered author(s):

    The examination of the intertemporal distribution of US productivity risk suggests that the conditional mean of productivity growth is an important determinant of macro quantities and asset prices. After establishing this empirical link, I rationalize it in a production economy featuring long-run productivity risk, Epstein and Zin (1989) preferences, and investment frictions. Both convex capital adjustment costs and convex reallocation costs across consumption and investment produce an annual equity premium as sizeable as in the data.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0304393214000506
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    Article provided by Elsevier in its journal Journal of Monetary Economics.

    Volume (Year): 66 (2014)
    Issue (Month): C ()
    Pages: 13-31

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    Handle: RePEc:eee:moneco:v:66:y:2014:i:c:p:13-31
    DOI: 10.1016/j.jmoneco.2014.04.001
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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