Year: 1998
Type: article
Abstract: This paper studies asset returns in different versions of the one-sector real business cycle model. We show that a model with habit formation preferences and capital adjustment costs can explain the historical equity premium and the average risk-free return while replicating the salient business cycle properties. The paper also applies a solution technique that combines loglinear methods with lognormal asset pricing formulae.
Source: Journal of Monetary Economics
Author: Urban J. Jermann
Institution: University of Pennsylvania
Language: English
Topic: Economic theories and models
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $4,660
OpenAlex ID: W2122270438