EQUITY-PREMIUM PUZZLE: EVIDENCE FROM BRAZILIAN DATA

This paper uses 1992:1-2004:2 quarterly data and two diferent methods (approximation under lognormality and calibration) to evaluate the existence of an equity- premium puzzle in Brazil. In contrast with some previous works in the Brazilian literature, I conclude that the model used by Mehra and Prescott (1985), either with additive or recursive preferences, is not able to satisfactorily rationalize the equity premium observed in the Brazilian data. The second contribution of the paper is calling the attention to the fact that the utility function calculated under the discrete-state approximation may not exist if the data (as it is the case with Brazilian time series) implies the existence of states in which high negative rates of consumption growth are attained with relatively high probability.

The n-Dimensional Bailey-Divisia Measure as a General-Equilibrium Measure of the Welfare Costs of Inflation

This paper shows that in economies with several monies the Bailey-Divisia multidimensional consumers surplus formula may emerge as an exact general-equilibrium measure of the welfare costs of in ation, provided that preferences are quasilinear.