Asset Returns, the Business Cycle, and the Labor Market: A Sensitivity Analysis for the German Economy

51 Pages Posted: 29 Mar 2011

See all articles by Burkhard Heer

Burkhard Heer

University of Augsburg; CESifo (Center for Economic Studies and Ifo Institute)

Alfred Maussner

University of Augsburg - Faculty of Business and Economics

Date Written: March 24, 2011

Abstract

We review the labor market implications of recent real-business-cycle models that successfully replicate the empirical equity premium. We document the fact that all models considered in this survey with the exception of Boldrin, Christiano, and Fisher (2001) imply a negative correlation of working hours and output that is not observed empirically, while in their model, the equity premium does not result from variation in the firm value, but from changes in the relative price of two goods. In addition, we calibrate the models with regard to characteristics from the German economy and show that the equity premium is very sensitive with regard to the utility parameters.

Keywords: equity premium, production CAPM, real-business cycle, labor market statistics

JEL Classification: G120, C630, E220, E320

Suggested Citation

Heer, Burkhard and Maussner, Alfred, Asset Returns, the Business Cycle, and the Labor Market: A Sensitivity Analysis for the German Economy (March 24, 2011). CESifo Working Paper Series No. 3391. Available at SSRN: https://ssrn.com/abstract=1793769

Burkhard Heer (Contact Author)

University of Augsburg ( email )

Universitätsstr. 2
Augsburg, 86159
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Alfred Maussner

University of Augsburg - Faculty of Business and Economics ( email )

Universitaetsstr. 16
86135 Augsburg
Germany
+49 821 598 4187 (Phone)
+49 821 598 4231 (Fax)

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