Equilibrium Growth, Inflation, and Bond Yields - Duke University's ...

Table 4: Asset Pricing Moments
Data ENDO 1 ENDO 2 EXO 1 EXO 2
1st Moments
E[r ∗ d − rf ] 5.84% 3.82% 3.79% 0.05% 2.15%
E[rf ] 1.62% 0.97% 0.98% 2.57% 2.06%
E[y (4) ] 5.29% 5.10% 5.10% 6.23% 5.67%
E[y (8) ] 5.48% 5.34% 5.33% 6.24% 5.61%
E[y (12) ] 5.66% 5.60% 5.59% 6.24% 5.55%
E[y (16) ] 5.80% 5.82% 5.82% 6.24% 5.48%
E[y (20) ] 5.89% 6.05% 6.05% 6.25% 5.40%
E[y (20) − y (1) ] 1.01% 1.13% 1.13% 0.02% -0.29%
2nd Moments
σ(rd − rf ) 17.87% 5.41% 5.35% 1.57% 4.04%
σ(rf ) 0.67% 0.49% 0.37% 0.37% 0.44%
σ(y (4) ) 2.99% 2.23% 2.21% 3.88% 4.02%
σ(y (8) ) 2.96% 2.16% 2.14% 3.80% 3.93%
σ(y (12) ) 2.88% 2.08% 2.07% 3.72% 3.85%
σ(y (16) ) 2.83% 2.01% 2.01% 3.64% 3.76%
σ(y (20) ) 2.77% 1.95% 1.94% 3.56% 3.67%
σ(y (20) − y (1) ) 1.00% 0.62% 0.32% 0.70% 0.72%
This table presents annual first and second asset pricing moments from the benchmark endogenous growth model
(ENDO 1), endogenous growth model without monetary policy uncertainty (ENDO 2), exogenous growth model with
a deterministic trend (EXO 1), exogenous growth model with a stochastic trend (EXO 2), and the data. The models
are calibrated at a quarterly frequency and the moments are annualized. Since the equity risk premium from the
models is unlevered, we follow Boldrin, Christiano, and Fisher (2001) and compute the levered risk premium from
the model as: r ∗ d,t+1 − rf,t = (1 + κ)(rd,t+1 − rf,t), where rd is the unlevered return and κ is the average aggregate
debt-to-equity ratio, which is set to 2
. Monthly return and price data are from CRSP and the corresponding sample
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moments are annualized. The data sample is 1953-2008.
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