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We develop a representative agent general equilibrium model with return extrapolation and recursive preferences. The model generates a large and countercyclical equity premium, a low and procyclical interest rate, a sizable and countercyclical Sharpe ratio, low interest rate volatility, strong excess volatility for equity, predictability of equity returns using price-dividend ratios, negative autocorrelations of equity returns, persistence of price-dividend ratios, as well as low correlationsdoi:10.2139/ssrn.3045658 fatcat:qnknay7vszf2vaamjsgx5n3vni