TY  - JOUR
AU  - Menzly,Lior
AU  - Santos,Tano
AU  - Veronesi,Pietro
TI  - The Time Series of the Cross Section of Asset Prices
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9217
PY  - 2002
Y2  - September 2002
UR  - http://www.nber.org/papers/w9217
L1  - http://www.nber.org/papers/w9217.pdf
N1  - Author contact info:
Lior Menzly
School of Business Administration
University of Southern California
University Park 1421
Los Angeles, CA 90089
Tel: 213/740-6515
E-Mail: plmenzly@ChicagoBooth.edu

Tano Santos
Graduate School of Business
Columbia University
3022 Broadway, Uris Hall 414
New York, NY  10027
Tel: 212/854-0489
Fax: 212/316-9180
E-Mail: js1786@columbia.edu

Pietro Veronesi
University of Chicago
Booth School of Business
5807 South Woodlawn Avenue
Chicago, IL  60637
Tel: 773/702-6348
Fax: 773/702-0458
E-Mail: pietro.veronesi@chicagobooth.edu
AB  - In this paper we propose a general equilibrium model that successfully reproduces the historical experience of the cross section of US stock prices as well as the realized history of the market portfolio. The model achieves this while addressing traditional concerns in the asset pricing literature: A high equity premium and volatility of returns, the long horizon predictability, and a low volatility of the risk free rate.  The model combines a rich payoff structure with a habit persistence discount factor, which allows us to identify the effect on prices of idiosyncratic cash flow shocks versus business cycle components.
ER  -