Habit, Production, and the Cross-Section of Stock Returns

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Chen, Andrew Y. (2014)
  • Subject: Equity premium puzzle; value premium; production; time-varying consumption volatility

Solutions to the equity premium puzzle should inform us about the cross-section of stock returns. An external habit model with heterogeneous firms reproduces numerous stylized facts about both the equity premium and the value premium. The equity premium is large, time-v... View more
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