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Persistent Catastrophic Shocks And Equity Premiums: A Note

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  • Saito, Makoto
  • Suzuki, Shiba

Abstract

This note demonstrates analytically that a persistent catastrophic shock on endowment growth, even if moderate, yields negative equity premiums when a representative agent is relatively prudent. In particular, it derives the minimum persistence necessary to have zero equity premiums.

Suggested Citation

  • Saito, Makoto & Suzuki, Shiba, 2014. "Persistent Catastrophic Shocks And Equity Premiums: A Note," Macroeconomic Dynamics, Cambridge University Press, vol. 18(5), pages 1161-1171, July.
    • Handle: RePEc:cup:macdyn:v:18:y:2014:i:05:p:1161-1171_00
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    Cited by:

    1. Suzuki, Shiba, 2014. "An exploration of the effect of doubt during disasters on equity premiums," Economics Letters, Elsevier, vol. 123(3), pages 270-273.
    2. Suzuki, Shiba, 2018. "Inequality and asset fire sales," MPRA Paper 90906, University Library of Munich, Germany.
    3. Masataka Suzuki, 2014. "Hidden persistent disasters and asset prices," Annals of Finance, Springer, vol. 10(3), pages 395-418, August.
    4. Herrenbrueck, Lucas, 2021. "Why a pandemic recession boosts asset prices," Journal of Mathematical Economics, Elsevier, vol. 93(C).
    5. Shiba Suzuki & Hiroaki Yamagami, 2020. "Optimism on Pollution-Driven Disasters and Asset Prices," Working Papers 2020.06, FAERE - French Association of Environmental and Resource Economists.
    6. Keiichi Morimoto & Shiba Suzuki, 2022. "Ambiguity in a pandemic recession, asset prices, and lockdown policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(5), pages 1039-1070, October.

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