Intertemporal Asset Pricing: Evidence from Germany

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The book is the first one to analyse the Equity Premium Puzzle and the Risk-free Rate Puzzle in the German capital market. It starts with a thorough discussion of the available theoretical models and then goes on to perform various empirical studies, applying two recent approaches for the empirical investigation of intertemporal asset pricing models, the variance bound approach and the calibration approach. The book provides insights into the basic mechanisms of intertemporal equilibrium asset pricing models derived from the consumption and investment choice of individuals. It shows that with reasonable and not very complicated modifications of the standard intertemporal equilibrium models, especially with recursive preferences, important properties of German rates of return can be explained. The book adds much to the understanding of intertemporal asset pricing and recursive preferences and at the same time points to various directions for future research.