Excess Asset Returns with Limited Enforcement
13 Pages Posted: 7 Aug 2009
Date Written: 2002
This paper investigates the effect of limited enforcement of contracts on asset returns in a three-period pure- exchange overlapping generations economy. We consider a life-cycle setting with a safe and a risky asset and find that lack of commitment can significantly affect the rate of returns of these assets and possibly generate large equity premia.
Keywords: asset returns, intertemporal consumer choice, lifecycle model
JEL Classification: E32, D91, D52
Suggested Citation: Suggested Citation