THE EQUITY PREMIUM A Puzzle
Rajnish Mehra,Edward C. Prescott +1 more
TLDR
This paper showed that an equilibrium model which is not an Arrow-Debreu economy will be the one that simultaneously rationalizes both historically observed large average equity return and the small average risk-free return.Citations
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Noise Trader Risk in Financial Markets
TL;DR: In this article, the authors present a simple overlapping generations model of an asset market in which irrational noise traders with erroneous stochastic beliefs both affect prices and earn higher expected returns.
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A Simple Model of Capital Market Equilibrium with Incomplete Information
TL;DR: The model financial economics encompasses finance, micro-investment theory and much of the economics of uncertainty as mentioned in this paper, and it has had a direct and significant influence on practice, as is evident from its influence on other branches of economics including public finance, industrial organization and monetary theory.
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Efficient Capital Markets: II
TL;DR: A review of the market efficiency literature can be found in this article, where the authors discuss the work that they find most interesting, and offer their views on what we have learned from the research on market efficiency.
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Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework
Larry G. Epstein,Stanley E. Zin +1 more
TL;DR: In this paper, a class of recursive, but not necessarily expected utility, preferences over intertemporal consumption lotteries is developed, which allows risk attitudes to be disentangled from the degree of inter-temporal substitutability, leading to a model of asset returns in which appropriate versions of both the atemporal CAPM and the inter-time consumption-CAPM are nested as special cases.
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ARCH modeling in finance: A review of the theory and empirical evidence
TL;DR: An overview of some of the developments in the formulation of ARCH models and a survey of the numerous empirical applications using financial data can be found in this paper, where several suggestions for future research, including the implementation and tests of competing asset pricing theories, market microstructure models, information transmission mechanisms, dynamic hedging strategies, and pricing of derivative assets, are also discussed.
References
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An intertemporal capital asset pricing model
TL;DR: In this article, an intertemporal model for the capital market is deduced from portfolio selection behavior by an arbitrary number of investors who aot so as to maximize the expected utility of lifetime consumption and who can trade continuously in time.
Journal ArticleDOI
Time to build and aggregate fluctuations
TL;DR: In this article, a general equilibrium model is developed and fitted to U.S. quarterly data for the post-war period, with the assumption that more than one time period is required for the construction of new productive capital and the non-time-separable utility function that admits greater intertemporal substitution of leisure.
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Asset prices in an exchange economy
TL;DR: In this article, the authors examine the stochastic behavior of equilibrium asset prices in a one-good, pure exchange economy with identical consumers, and derive a functional equation for price as a function of the physical state of the economy.
ReportDOI
Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends
TL;DR: In this article, the authors developed the efficient markets model in Section I to clarify some theoretical questions that may arise in connection with the inequality, and some similar inequalities will be derived that put limits on the standard deviation of the innovation in price and the variance of the change in price.
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