×

### Let's log you in.

or

Don't have a StudySoup account? Create one here!

×

or

43

0

2

# Macro Theory ECN 200E

UCD
GPA 3.57

Kevin Salyer

These notes were just uploaded, and will be ready to view shortly.

Either way, we'll remind you when they're ready :)

Get a free preview of these Notes, just enter your email below.

×
Unlock Preview

COURSE
PROF.
Kevin Salyer
TYPE
Class Notes
PAGES
2
WORDS
KARMA
25 ?

## Popular in Economcs

This 2 page Class Notes was uploaded by Madie Schinner on Tuesday September 8, 2015. The Class Notes belongs to ECN 200E at University of California - Davis taught by Kevin Salyer in Fall. Since its upload, it has received 43 views. For similar materials see /class/191858/ecn-200e-university-of-california-davis in Economcs at University of California - Davis.

×

## Reviews for Macro Theory

×

×

### What is Karma?

#### You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 09/08/15
1 Derivation of eq 1079 in Ljungqvist amp Sar gent p 262 First7 LampS make the assumption that the returns and consumption growth follow the following process C 2 H Q P Emu 032 1 t 1r 1 1 exp Ei t1 70222 isb 2 It is assumed that the means of the innovations 6H1 are 0 And also that they are normally distributed The basic asset pricing equation is 18E lt1r 1 3 Using the assumed processes for the returns and consumption growth eqs 1 and 2 yields 1 1 FiElEexp6m1 7 0222 7 7ac1 7 TE2H 4 Note that eq1 has simply been raised to the power of 77 The term in braces can be written as Ezkt1 76c 1 0222 7032 5 That last two terms are constants De ne the variable as as t1 5it1 75w 6 Since 6239 and so are jointly normally distributed7 the mean and variance of ac Ext1 0 7 Z 7 27Cov Shea 8 This implies that the random variable expx1 is log normally distributed so using the formulas given in LampS we have 0U720 02 20272 C01 86 Eexpxt1 exp W 9 First re7writing eq4 as 1 1 772 EAWE exp ac1 exp 70222 7032 10 And using eq9 we have v 2 2 272 C v 1 1772E YeXp 027 79 27 0U5275c702227032 1 1 W EAW exp 7 1 7 032 7 7Cov 62569 11 which is eq1079 in LampS For i b ie riskless bonds7 C01 61769 0 Then7 taking logs and rearranging terms we have 0 Fb7ln 7lnEA7717 2 Notice the implications that this expression has for how risk aversion or intertemporal substitution and the variance of consumption have on the risk7 free rate For the risk premium7 we have rs 7 77b 7001 6569 Since 775 7 77b m 006 and C01 65 ac 0002197 this requires 7 m 27 which is too high 7 this is the equity premium puzzle

×

×

### BOOM! Enjoy Your Free Notes!

×

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

## Why people love StudySoup

Bentley McCaw University of Florida

#### "I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Anthony Lee UC Santa Barbara

#### "I bought an awesome study guide, which helped me get an A in my Math 34B class this quarter!"

Steve Martinelli UC Los Angeles

Forbes

#### "Their 'Elite Notetakers' are making over \$1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!
×

### Refund Policy

#### STUDYSOUP CANCELLATION POLICY

All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email support@studysoup.com

#### STUDYSOUP REFUND POLICY

StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here: support@studysoup.com

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to support@studysoup.com