The Equity Premium and the Concentration of Aggregate Shocks
AbstractThis paper examines an economy in which aggregate shocks are not dispersed equally throughout the population. Instead, while these shocks affect all individuals ex ante, they are concentrated among a few ex post.The equity premium in general depends on the concentration of these aggregate shocks; it follows that one cannot estimate the degree of risk aversion from aggregate data alone. These findings suggest that the empirical usefulness of aggregation theorems for capital asset pricing models is limited.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1788.
Date of creation: Jan 1986
Date of revision:
Publication status: published as Mankiw, N. Gregory. "The Equity Premium and the Concentration of Aggregate Shocks," Journal of Financial Economics, Vol. 17, (1986), pp. 211-219.
Note: EFG ME
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Other versions of this item:
- Mankiw, N. Gregory, 1986. "The equity premium and the concentration of aggregate shocks," Journal of Financial Economics, Elsevier, Elsevier, vol. 17(1), pages 211-219, September.
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