This paper studies the determinants of the equity premium as implied by producers' first-order conditions. A simple closed form expression is presented for the Sharpe ratio as a function of investment volatility and technology parameters. Calibrated to the US postwar economy, the model can match...

This paper considers the term structure of interest rates implied by a production-based asset pricing model in which the fundamental drivers are investment in equipment and structures as well as inflation. The model matches the average yield curve up to five-year maturity almost perfectly....