This paper is a critical review of the literature on the “equity premium puzzle≓. The puzzle,
as originally articulated more than fifteen years ago, underscored the inability of the …

Over two decades ago, Mehra and Prescott (1985) challenged the finance profession with a
poser: the historical US equity premium is an order of magnitude greater than can be …

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 …

Empirical difficulties encountered by representative-consumer models are resolved in an
economy with heterogeneity in the form of uninsurable, persistent, and heteroscedastic labor …

Two modifications are introduced into the standard real-business-cycle model: habit
preferences and a two-sector technology with limited intersectoral factor mobility. The model …

Ongoing questions on the historical mean and standard deviation of the return on equities
and bonds and on the equilibrium demand for these securities are addressed in the context …

We present evidence that the equity premium and the premium of value stocks over growth
stocks are consistent in the 1982–96 period with a stochastic discount factor calculated as …

This article explores the link between the composition of firms' capital and stock returns. I
develop a general equilibrium production economy where firms use two factors: real estate …

This dissertation examines the relationship between the term structure of interest rates and
the macro economy. In the first chapter an affine term structure model of bond yields is …

The mean, covariability, and predictability of the return of different classes of financial assets
challenge the rational economic model for an explanation. The unconditional mean …