Excess Asset Returns with Limited Enforcement

13 Pages Posted: 7 Aug 2009

See all articles by Luisa Lambertini

Luisa Lambertini

Ecole Polytechnique Fédérale de Lausanne

Costas Azariadis

Federal Reserve Banks - Federal Reserve Bank of St. Louis

Date Written: 2002

Abstract

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

Lambertini, Luisa and Azariadis, Costas, Excess Asset Returns with Limited Enforcement (2002). American Economic Review, Vol. 92, No. 2, 2002. Available at SSRN: https://ssrn.com/abstract=1444303

Luisa Lambertini (Contact Author)

Ecole Polytechnique Fédérale de Lausanne ( email )

Odyssea
Station 5
Lausanne, 1015
Switzerland

Costas Azariadis

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

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