Abstract
A dynamic general equilibrium multifactor asset pricing model for a monetary economy with capital accumulation and multisector production is constructed. Equilibrium Clower constraints on some investment goods and some consumption goods are imposed. An equilibrium APT model is constructed where the covariance between the inflation tax, distorted equilibrium investment returns, and fundamental forcing processes are important in determining equilibrium risk prices. The model is used to address issues concerning the relative importance of real and nominal factors in asset pricing raised in recent papers by Chen, Roll, and Ross (1986) and Cochrane (1991, 1992).
Original language | English (US) |
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Pages (from-to) | 569-597 |
Number of pages | 29 |
Journal | Journal of Economic Dynamics and Control |
Volume | 19 |
Issue number | 3 |
DOIs | |
State | Published - Apr 1995 |
Externally published | Yes |
Keywords
- Asset pricing
- Monetary business cycles
ASJC Scopus subject areas
- Economics and Econometrics
- Control and Optimization
- Applied Mathematics