Exact Solutions for Expected Rates of Return under Markov Regime Switching: Implications for the Equity Premium Puzzle
推导出在消费和股息增长率受马尔可夫体制转换过程影响时，股票和无风险票据预期收益率的简单闭式解，并证明该过程会加剧股权溢价之谜和无风险利率之谜，附三个实证例子说明其影响。
This paper derives simple closed-form solutions for expected rates of return on stocks and riskless one-period bills under the assumption that shocks to the growth rates of consumption and dividends are generated by a Markov regime-switching process. These closed-form solutions are used to show that the Markov regime-switching process exacerbates the equity premium puzzle and the risk-free rate puzzle. Three empirical examples illustrate the magnitude of the effects of Markov regime switching on equilibrium expected returns.