Stock price volatility and equity premium

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. C...

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Bibliographic Details
Published inJournal of monetary economics Vol. 47; no. 2; pp. 249 - 283
Main Authors Brennan, Michael J., Xia, Yihong
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.04.2001
Elsevier
Elsevier Sequoia S.A
SeriesJournal of Monetary Economics
Subjects
Capital market
Economic theory
Equity capital
Equity premium
Growth rates
Interest rates
Learning
Monetary economics
Stock prices
Stock returns
Studies
Volatility
United States > US
Learning
Equity premium
G1
E1
Volatility
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Summary: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.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0304-3932
1873-1295
DOI:10.1016/S0304-3932(01)00042-3