Excess Asset Returns and Limited Enforcement
This paper investigates the effect of limited enforcement of contracts on asset returns in a three-period pure- exchange overlapping generations economy. We consider a life-cycle setting with a safe and a risky asset and find that lack of commitment can significantly affect the rate of returns of these assets and possibly generate large equity premia.
JEL E32, D91, D52
Record created on 2007-07-16, modified on 2016-08-08