This paper explores the baby boom's impact on U.S. house prices and interest rates in the post-war 20th century and beyond. Using a simple Lucas asset pricing model, I quantitatively account for the increase in real house prices, the path of real interest rates, and the timing of low-frequency...

The main goal of this paper is to measure the welfare costs of business cycles in a production economy in which the representative agent has low risk aversion and - at the same time - the equity premium and the co-movements of aggregate quantities and market returns are comparable to what...

Standard business cycle models with state-additive preferences, while broadly consistent with the behavior of real macroeconomic aggregates, are unable to generate asymmetries between expansions and recessions, and are also inconsistent with the behavior of asset prices. In this paper we exploit...

We document a new stylized fact regarding the term-structure of futures volatility. We show that the relationship between the volatility of futures prices and the slope of the term structure of prices is non-monotone and has a \V-shape". This aspect of the data cannot be generated by basic...

This paper investigates the role of consumer heterogeneity in explaining asset returns. Using a Taylor series expansion of the individual's marginal utility of consumption around the conditional expectation of consumption, we derive an approximate equilibrium model for expected returns. In this...

If stocks go up, investors may want to rebalance. But investors cannot all rebalance. Expected returns mustrise (or other moments must change) so that the average investor is happy to hold the total market portfolio despite its greater allocation to stocks. In this way, of market clearing can...

Asset prices display high covariance relative to the covariance of their payoffs. (Pindyck and Rotemberg, 1993; Barberis, Shleifer and Wurgler, 2002) Many take this ‘excess covariance’ to be evidence of investor irrationality. This model reconciles the high covariance with a rational...

Milton Friedman argued that irrational traders will consistently lose money, won't survive and, therefore, cannot influence long run equilibrium asset prices. Since his work, survival and price influence have been assumed to be the same. Often partial equilibrium analysis has been relied upon to...