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Generational Asset Pricing, Equity Puzzles, and Cyclicality

Author

Listed:
  • Alan Guoming Huang

    (University of Waterloo)

  • Eric Hughson

    (Claremont McKenna College)

  • J. Chris Leach

    (University of Colorado)

Abstract

To examine the potential role cohort preferences play in asset pricing cycles and puzzles, we consider a model with stochastic generational variation in preferences. In our structure, the pricing kernel reflects an investing generation's consumption growth from mid-life to retirement rather than aggregate consumption's growth over the same time period. Generational domination of the pricing kernel provides insight into rationalizing three widely-recognized asset pricing puzzles and suggests one potential contributor to boom-bust patterns in stock market returns. (Copyright: Elsevier)

Suggested Citation

  • Alan Guoming Huang & Eric Hughson & J. Chris Leach, 2016. "Generational Asset Pricing, Equity Puzzles, and Cyclicality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 22, pages 52-71, October.
  • Handle: RePEc:red:issued:13-198
    DOI: 10.1016/j.red.2016.06.003
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    More about this item

    Keywords

    Generational uncertainty; Pricing kernel domination; Equity premium puzzles; Boom-bust cycle;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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