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The Properties of the Equity Premium and the Risk-Free Rate: An Investigation Across Time and Countries

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Author Info
Fabio Canova (International Monetary Fund)
Gianni De Nicoló (International Monetary Fund)
Abstract

We examine the relationship between the equity premium and the risk-free rate over time for Group of Seven countries. We show the existence of subsample instabilities, cross-country differences, and examine whether a consumption-based CAPM model is able to explain the heterogeneity of the data when cross-country and time-series differences in technology parameters are accounted for. We demonstrate that the basic features of the equity premium and risk-free puzzles remain regardless of the sample period and the country considered. Modifications of the basic setup also fall short of providing an explanation for the puzzles. Copyright 2003, International Monetary Fund

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File URL: http://www.imf.org/External/Pubs/FT/staffp/2003/02/pdf/canova.pdf
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Publisher Info
Article provided by Palgrave Macmillan Journals in its journal IMF Staff Papers.

Volume (Year): 50 (2003)
Issue (Month): 2 ()
Pages: 4
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Handle: RePEc:pal:imfstp:v:50:y:2003:i:2:p:4

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Find related papers by JEL classification:
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

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This page was last updated on 2009-11-30.

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