Handbook of the Equity Risk Premium

CHAPTER 14 Asset Prices and Intergenerational Risk Sharing: The Role of Idiosyncratic Earnings Shocks*

Kjetil Storesletten

University of Oslo and CEPR

Chris Telmer

Tepper School of Business, Carnegie Mellon University

Amir Yaron

The Wharton School, the University of Pennsylvania, and NBER

1. Introduction

2. An Analytical Example of the Constantinides-Duffie Model

2.1. Calibration of the Constantinides-Duffie Economy

2.2. Model Implications

3. Incorporating the Life Cycle

3.1. Calibration

4. Quantitative Results

4.1. Asset Pricing Implications

4.2. Sensitivity Analysis

5. Conclusions

References

A. Calibration Appendix

B. Asset Pricing

Abstract In their seminal paper, Rajnish Mehra and Edward Prescott (1985) were the first among many subsequent ...