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The equity premium puzzle and decreasing relative risk aversion

Author

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  • M. J. Roche

    (Economics, NUI Maynooth, Ireland)

Abstract

Agents are assumed to have a power risk aversion utility function in an otherwise standard asset pricing model. These preferences are shown to be capable of eliminating one version of the equity premium and risk free rate puzzles when they display decreasing relative risk aversion.

Suggested Citation

  • M. J. Roche, 2005. "The equity premium puzzle and decreasing relative risk aversion," Economics Department Working Paper Series n1510205, Department of Economics, National University of Ireland - Maynooth.
    • Handle: RePEc:may:mayecw:n1510205
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    File URL: http://repec.maynoothuniversity.ie/mayecw-files/N1510205.pdf
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    More about this item

    Keywords

    asset pricing; equity premium; risk aversion;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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