Lucas tree model
E455412
asset pricing model
consumption-based asset pricing model
general equilibrium model
macroeconomic model
representative agent model
The Lucas tree model is a foundational asset-pricing framework in macroeconomics that models a representative agent’s consumption and investment decisions using a single, infinitely lived “tree” that yields a stochastic stream of dividends.
Statements (50)
| Predicate | Object |
|---|---|
| instanceOf |
asset pricing model
ⓘ
consumption-based asset pricing model ⓘ general equilibrium model ⓘ macroeconomic model ⓘ representative agent model ⓘ |
| assumes |
complete markets
ⓘ
expected utility maximization ⓘ frictionless markets ⓘ infinitely lived representative agent ⓘ no arbitrage ⓘ perfect foresight in equilibrium ⓘ rational expectations ⓘ time-separable preferences ⓘ |
| coreConcept |
consumption-smoothing
ⓘ
equilibrium asset prices ⓘ equity premium ⓘ intertemporal marginal rate of substitution ⓘ pricing kernel ⓘ risk-free rate ⓘ single productive tree ⓘ state-contingent claims ⓘ stochastic discount factor ⓘ stochastic dividend stream ⓘ |
| creator | Robert E. Lucas Jr. NERFINISHED ⓘ |
| equilibriumCondition |
market clearing
ⓘ
no-arbitrage pricing ⓘ optimal consumption choice ⓘ |
| field |
asset pricing
ⓘ
financial economics ⓘ macroeconomics ⓘ |
| hasAgentType | representative agent ⓘ |
| hasAssetType | single tree equity claim ⓘ |
| hasDividendProcess | stochastic process ⓘ |
| hasGoodType | single consumption good ⓘ |
| influenced |
long-run risk models
ⓘ
modern macro-finance ⓘ real business cycle models ⓘ |
| preferenceSpecification |
CRRA utility
ⓘ
time-additive utility ⓘ |
| relatedTo |
Arrow–Debreu equilibrium
NERFINISHED
ⓘ
consumption-based CAPM ⓘ stochastic growth models ⓘ |
| timeHorizon | infinite horizon ⓘ |
| usedFor |
analyzing equity pricing in general equilibrium
ⓘ
benchmarking consumption-based asset pricing tests ⓘ deriving asset prices from consumption choices ⓘ linking macroeconomic risk to asset prices ⓘ studying risk and return trade-offs ⓘ studying the equity premium puzzle ⓘ studying the risk-free rate puzzle ⓘ |
Referenced by (1)
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