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Asset Prices and Business Cycles with Costly External Finance / Joao Gomes, Amir Yaron, Lu Zhang.
- Format:
- Book
- Author/Creator:
- Gomes, Joao.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w9364.
- NBER working paper series no. w9364
- Language:
- English
- Subjects (All):
- Business cycles.
- Corporations--Finance.
- Corporations.
- Investments Mathematical models.
- Investments.
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2002.
- Cambridge, Mass. : National Bureau of Economic Research, 2002.
- Summary:
- This paper asks whether the asset pricing fluctuations induced by the presence of costly external finance are empirically plausible. To accomplish this, we incorporate costly external finance into a dynamic stochastic general equilibrium model and explore its implications for the properties of the returns on key financial assets, such as stocks, bonds and risky loans. We find that the mean and volatility of the equity premium, although small, are significantly higher than those in comparable adjustment cost models. However, we also show that these results require a procyclical financing premium, a property that seems at odds with the data.
- Notes:
- Print version record
- December 2002.
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