In this paper, we verify the predictability of marginal q on rms' capital invest- ments. We compare Granger's causality of four manufacturing industries with the LA-VAR model and Vector Error Correction Model(VECM). We obtain the empirical results that the null hypothesis of no Granger's...

This paper develops a new method for solving both equity premium and risk free rate puzzles based on the standard utility function. The method for solving the equity premium puzzle in accordance with Mehra and Prescott (1985) needs to be simultaneously consistent with the method for solving the...