The Risk Premium for Equity: Implications for Clinton's Proposed Diversification of the Social Security Trust Fund

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The Risk Premium for Equity: Implications for Clinton's Proposed Diversification of the Social Security Trust Fund

Author Info

Grant, S.
Quiggin, J.

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Abstract

Any meaningful reform of the US Social Security system must deal with the system's current outstanding accumulated unfunded liabilities. The authors model these as a once-off financial liability payable 'tomorrow'. They show that if the equity premium puzzle arises from adverse selection problems which prevent risk-spreading through market transactions, then the government can improve the ex ante welfare of the young today by acquiring equity today to assist in financing its obligations to meet social security payments to the old tomorrow.

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Publisher Info
Paper provided by Australian National University, College of Business and Economics, School of Economics in its series ANUCBE School of Economics Working Papers with number 368.

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Length: 12 pages
Date of creation: 1999
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Handle: RePEc:acb:cbeeco:368

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Paper
- Grant, S. & Quiggin, J., 1999. "The Risk Premium for Equity: Implications for Clinton's Proposed Diversification of the Social Security Trust Fund," Papers 368, Australian National University - Department of Economics.

Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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Grant, S. & Quiggin, J., 2001. "The risk premium for equity : explanations and implications," Discussion Paper 89, Tilburg University, Center for Economic Research. [Downloadable!]
Simon Grant & John Quiggin, 2005. "What Does the Equity Premium Mean?," The Economists' Voice, Berkeley Electronic Press, vol. 2(4), pages 2. [Downloadable!]

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This page was last updated on 2008-12-29.

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