The equity premium puzzle and decreasing relative risk aversion
AbstractAgents 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.
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Bibliographic InfoPaper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n1510205.
Length: 10 pages
Date of creation: Feb 2005
Date of revision:
asset pricing; equity premium; risk aversion;
Other versions of this item:
- Maurice J. Roche, 2006. "The equity premium puzzle and decreasing relative risk aversion," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 2(3), pages 179-182, May.
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-09-29 (All new papers)
- NEP-FIN-2005-09-29 (Finance)
- NEP-FMK-2005-09-29 (Financial Markets)
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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NBER Working Papers
9525, National Bureau of Economic Research, Inc.
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