This paper develops a tractable stochastic overlapping generations model to analyze the equilibrium equity premium and growth rate of the capital stock in the presence of a defined-benefit Social Security system. If the Social Security Trust Fund increases the share of its portfolio held in...

The equity premium consists of a term premium reflecting the longer maturity of equity relative to short-term bills, and a risk premium reflecting the stochastic nature of equity payoffs and the deterministic nature of payoffs on reckless bills. This paper analyzes term premia and the risk...

The effects on asset prices of changes in risk are studied in a general equilibrium model in which the conditional risk evolves stochastically over time. The savings decisions of consumers take account of the fact that conditional risk is a serially correlated random variable. By restricting the...