The Equity Premium : A Deeper Puzzle

  title={The Equity Premium : A Deeper Puzzle},
  author={F. A. M. de Azeredo and Rajnish Mehra and John B. Donaldson and Edward C. Prescott},
Traditional pre-1930 consumption measures understate the extent of serial correlation in the U.S. annual real growth rate of per capita consumption of nondurables and services due to measurement limitations in the construction of their major components. Under alternative measures proposed in this study, the serial correlation of consumption growth is found to be 0.32, contrary to the original estimate of −0.14. This new evidence implies that the class of dynamic general equilibrium models… CONTINUE READING
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