Risks after disasters: a note on the effects of precautionary saving on equity premiums
AbstractThis paper studies the effects on equity premiums of grisks after disastersh, which are defined as a sharp rise in volatility of real per capita GDP growth rates immediately following disasters. This paper makes three contributions. First, we analytically demonstrate that if and only if the degree of relative prudence is higher than 2, risks after disasters decrease equity premiums. Second, we find that the differences between equity premiums with and without risks after disasters are quantitatively significant. Third, equity premiums are still higher in the case of disaster than without a disaster.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 29 (2009)
Issue (Month): 1 ()
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Other versions of this item:
- Shiba Suzuki, 2009. "Risks after Disasters: A Note on the Effects of Precautionary Saving on Equity Premiums," Global COE Hi-Stat Discussion Paper Series gd08-040, Institute of Economic Research, Hitotsubashi University.
- G1 - Financial Economics - - General Financial Markets
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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