HABIT PERSISTENCE AND ASSET RETURNS IN AN EXCHANGE ECONOMY

Michele Boldrin, Lawrence Christiano and Jonas Fisher

Macroeconomic Dynamics, 1997, vol. 1, issue 2, 312-332

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.

Date: 1997
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Working Paper: Habit persistence and asset returns in an exchange economy (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:1:y:1997:i:02:p:312-332_00

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