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From Equity Premium Puzzle to Expectations Puzzle: A General Equilibrium Production Economy with Stochastic Habit Formation

Dai, Qiang
NYU Faculty Digital Archive · Papers
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multidisciplinary
This paper develops a general equilibrium model for a representative agent, production economy with stochastic internal habit formation. The model describes a scale-independent economy, with a unique stochastic investment opportunity set. Local correlation between the stochastic interest rate and ti
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