Asset Valuation and Production Efficiency in an Overlapping-Generations Model with Production Shocks

W. Davis Dechert and Kenji Yamamoto

The Review of Economic Studies, 1992, vol. 59, issue 2, 389-405

Abstract: This paper extends the Cass criterion for production efficiency to include uncertainty and uses it to show that a stock market equilibrium in an overlapping-generations model with production uncertainty is efficient. It also develops a no-bubbles asset-pricing formula. Results are compared with Brock's (1982) infinite-lived consumer model and it is shown that the stock market equilibrium in the overlapping-generations model has precisely the same asset valuation as Brock's infinitely-lived agent model.

Date: 1992
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:59:y:1992:i:2:p:389-405.

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