Abstract
A dynamic general equilibrium model of stock prices is developed which yields a stock price volatility and equity premium that are close to the historical values. Non-observability of the expected dividend growth rate introduces an element of learning which increases the volatility of stock price. Calibration to the U.S. dividend and consumption processes yield interest rate and stock price processes that conform closely to the styled facts for the U.S. capital market. © 2001 Elsevier Science B.V.
| Original language | English |
|---|---|
| Pages (from-to) | 249-283 |
| Number of pages | 34 |
| Journal | Journal of Monetary Economics |
| Volume | 47 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - Apr 2001 |
Keywords
- E1
- Equity premium
- G1
- Learning
- Volatility