Not logged in.
Quick Search - Contribution
Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Borrowing Costs and the Demand for Equity over the Life Cycle |
| Organization Unit | |
| Authors |
|
| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Journal Title | Review of Economics and Statistics |
| Geographical Reach | international |
| Volume | 88 |
| Number | 2 (06) |
| Page Range | 348 - 362 |
| Date | 2006 |
| Abstract Text | We construct a life cycle model that delivers realistic behavior for both equity holdings and borrowing. The key model ingredient is a wedge between the cost of borrowing and the risk-free investment return. Borrowing can either raise or lower equity demand, depending on the cost of borrowing. A borrowing rate equal to the expected return on equity-which we show roughly matches the data-minimizes the demand for equity. Alternative models with no borrowing or limited borrowing at the risk-free rate cannot simultaneously fit empirical evidence on borrowing and equity holdings. Copyright Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology. |
| Official URL | http://www.mitpressjournals.org/doi/pdfplus/10.1162/rest.88.2.348 |
| PDF File |
Download
|
| Export |
BibTeX
EP3 XML (ZORA)
|