Douch, Mohamed (2004): Equity Premiums In Small Open Economy.
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It is now well known that the RBC models have enjoyed successful results in explaining the dynamics of the business cycle variables but fail to replicate similar interesting stylized facts while studying the behavior of asset prices. One line of progress for solving this shortcoming has been to modify utility to account for habit persistence and to incorporate capital adjustment costs. This paper study a small open economy general equilibrium model along with asset pricing formula based on the lognormality of the disturbance distribution. Our results stipulate that extending models with habit forming preferenses and capital adjustment cost fails to account for a substantial equity premium in a small open economy environment.
|Item Type:||MPRA Paper|
|Original Title:||Equity Premiums In Small Open Economy|
|Keywords:||Asset pricing, Equity premium, habit formation, small open economy JEL classification: G15, G12, C63, F41|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
C - Mathematical and Quantitative Methods > C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C63 - Computational Techniques; Simulation Modeling
G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
|Depositing User:||Mohamed Douch|
|Date Deposited:||14. Apr 2009 00:37|
|Last Modified:||12. Feb 2013 00:42|
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