Generational asset pricing, equity puzzles, and cyclicality

To examine the potential role cohort preferences play in asset pricing cycles and puzzles, we consider a model with stochastic generational variation in preferences. In our structure, the pricing kernel reflects an investing generation's consumption growth from mid-life to retirement rather than aggregate consumption's growth over the same time period. Generational domination of the pricing kernel provides insight into rationalizing three widely-recognized asset pricing puzzles and suggests one potential contributor to boom-bust patterns in stock market returns. [web URL: http://www.sciencedirect.com/science/article/pii/S1094202516300126]