The equity premium in The Netherlands: an analysis of 21 stock exchange securities based on the Campbell model
AbstractThe equity premium is analysed for 21 indiviual firms who are listed at the Dutch stock market. The analysis is based on Campbell's model which explains the equity premium as a linear combination of the covariances between the returns and the residuals of state variables. The residuals are obtained by estimating a first order VAR. This method also takes into account the importance of human capital. The resulting equation has a multifactor form in line with arbitrage pricing theory. The degree of risk aversion is the important parameter in this equation. Estimation by means of the generalized method of moments gives plausible results for the degree of risk aversion.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number 555.
Date of creation: 1998
Date of revision:
equity premium; individual stock market firms; risk aversion;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
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