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Kevin E. Beaubrun-Diant
''Can a Time-to-Plan Model explain the Equity Premium Puzzle''
( 2005, Vol. 7 No.2 )
This paper proposes a quantitative evaluation of the time-to-plan technology in order to investigate up to which point this mechanism could constitute a satisfactory alternative to the well-known capital adjustment cost technology. We show that the time-to-plan mechanism reproduces a realistic risk-free rate, whilst being capable of generating a substantial equity premium. About the model's explanation of the business cycle, it turns out that the model predicts a perfectly positive and significant correlation between employment and output.
E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data)
Manuscript Received : Oct 26 2004 Manuscript Accepted : Mar 08 2005

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