文档介绍：JUNIOR CAN’T BORROW:
A NEW PERSPECTIVE ON THE EQUITY PREMIUM PUZZLE

e M. Constantinides
University of Chicago and NBER
John B. Donaldson
Columbia University
Rajnish Mehra
University of California, Santa Barbara

ABSTRACT
Ongoing questions on the historical mean and standard deviation of the return on equities and bonds and on the equilibrium
demand for these securities are addressed in the context of a stationary, overlapping-generations economy in which consumers
are subject to a borrowing constraint. The key feature captured by the OLG economy is that the bulk of the future e of the
young consumers is derived from their wages ing in their middle age, while the bulk of the future e of the middle-
aged consumers is derived from their savings in equity and bonds. The young would like to borrow and invest in equity but the
borrowing constraint prevents them from doing so. The middle-aged choose to hold a diversified portfolio that includes positive
holdings of bonds and this explains the demand for bonds. Without the borrowing constraint, the young borrow and invest in
equity, thereby decreasing the mean equity premium and increasing the rate of interest.

JEL Classifications: D91, E21, G11, G12
Keywords: equity premium, borrowing constraints, limited stock market participation, lifecycle portfolio investment.

Current draft: March 16, 2001

We thank Andrew Abel, John Cochrane, Roger Craine, Domenico Cuoco, Steven Davis, Edward Glaeser the editor, John Heaton,
Thore Johnsen, Hayne Leland, Robert Lucas, the late Merton Miller, Kevin Murphy, Nick Souleles, Nancy Stokey, Jonathan
Parker, Raaj Sah, Raman Uppal, three anonymous referees, participants at numerous conferences and seminars for helpful
comments. We are particularly indebted to Edward Prescott for numerous helpful insights and advice on the calibration of our
model. We also thank Yu-Hua Chu, Yubo Wang, and Lior Mezly putational assist