Year: 1988
Type: report
Abstract: This paper exploits producer's first order conditions to link asset prices to data on investment, output, etc. through marginal rates of transformation, just as consumer's first order conditions are commonly used to link asset prices to consumption data or proxies through marginal rates of substitution.It presents simulation economies analogous to the consumption based models of Mehra and Prescott (1985) and Backus, Gregory and Ziri (1986) that capture the size of the equity premium and the size and cyclical timing of the forward rate term premium.
DOI: 10.3386/w2776
Author: John Cochrane
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1507180271