Abstract

Analyse: The links between economic fluctuations and asset returns are at the heart of many open questions in macroeconomics and finance.
In this thesis we apply real business cycle theory to study three questions in this field.
First, researchers have tried without success to explain - with the one-sector stochastic growth model - the large historical differences in average returns on equity and on bonds, the so called "equity premium".
We find that habit formation in preferences and capital adjustment costs dramatically improve the model's ability to generate high equity premia.
Second, we study how the presence of nontradable human capital risk affects optimal international portfolio diversification.
We find that agents should reduce domestic asset holdings to hedge their nontradable human capital risk.
And third, we show that a major empirical criticism against the permanent income hypothesis can be explained by households substituting between market and nonmarket produced consumption goods.

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