Consumption Asset Pricing with Stable Shocks - Exploring a Solution and its Implications for the Equity Premium Puzzle
Author | : Prasad V. Bidarkota |
Publisher | : |
Total Pages | : 33 |
Release | : 2001 |
ISBN-10 | : OCLC:1290403488 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Consumption Asset Pricing with Stable Shocks - Exploring a Solution and its Implications for the Equity Premium Puzzle written by Prasad V. Bidarkota and published by . This book was released on 2001 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the consumption based asset pricing model due to Lucas (1978). The exogenous endowment sequence is modeled as a linear stochastic process driven by stable shocks in an otherwise standard framework. The Gaussian process emerges as a special case. We derive exact analytical solutions for asset prices and returns, and provide conditions under which these exist. We also study the implications of the model for the equity premium puzzle.