The equity premium implied by production

Urban Jermann

Journal of Financial Economics, 2010, vol. 98, issue 2, 279-296

Abstract: This paper studies the determinants of the equity premium as implied by producers' first-order conditions. A simple closed form expression is presented for the Sharpe ratio as a function of investment volatility and technology parameters. Calibrated to the US postwar economy, the model can match the historical first and second moments of the market return and the risk-free interest rate. The model also generates a very volatile Sharpe ratio and market price of risk.

Keywords: Equity; premium; Production (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (31)

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Related works:
Working Paper: The Equity Premium Implied by Production (2006)
Working Paper: The Equity Premium Implied by Production (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:98:y:2010:i:2:p:279-296

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