Risks after disasters: a note on the effects of precautionary saving on equity premiums
This paper studies the effects on equity premiums of risks after disasters, which are defined as a sharp rise in volatility of real per capita GDP growth rates immediately following disasters. This paper makes three contributions. First, we analytically demonstrate that if and only if the degree of relative prudence is higher than 2, risks after disasters decrease equity premiums. Second, we find that the differences between equity premiums with and without risks after disasters are quantitatively significant. Third, equity premiums are still higher in the case of disaster than without a disaster.
Volume (Year): 29 (2009)
Issue (Month): 1 ()
|Contact details of provider:|| |
References listed on IDEAS
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.:
- Kimball, Miles S, 1990.
"Precautionary Saving in the Small and in the Large,"
Econometric Society, vol. 58(1), pages 53-73, January.
- Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
- Philip Merrigan & Michel Normandin, 1994.
"Precautionary Saving Motives: An Assessment from U.K. Time Series of Cross-Sections,"
Cahiers de recherche CREFE / CREFE Working Papers
29, CREFE, Université du Québec à Montréal.
- Merrigan, Philip & Normandin, Michel, 1996. "Precautionary Saving Motives: An Assessment from UK Time Series of Cross-Sections," Economic Journal, Royal Economic Society, vol. 106(438), pages 1193-1208, September.
- Francois Gourio, 2008. "Disasters and Recoveries," American Economic Review, American Economic Association, vol. 98(2), pages 68-73, May.
- Masahiro Hori & Satoshi Shimizutani, 2006.
"Did Japanese consumers become more prudent during 1998-1999? Evidence from household-level data,"
International Economic Journal,
Taylor & Francis Journals, vol. 20(2), pages 197-209.
- Masahiro Hori & Satoshi Shimizutani, 2005. "Did Japanese Consumers Become More Prudent During 1998-1999?: Evidence From Household Level Data," Hi-Stat Discussion Paper Series d05-109, Institute of Economic Research, Hitotsubashi University.
- Barro, Robert, 2006.
"Rare Disasters and Asset Markets in the Twentieth Century,"
3208215, Harvard University Department of Economics.
- Robert J. Barro, 2006. "Rare Disasters and Asset Markets in the Twentieth Century," The Quarterly Journal of Economics, Oxford University Press, vol. 121(3), pages 823-866.
- Dynan, Karen E, 1993. "How Prudent Are Consumers?," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1104-13, December.
- Rietz, Thomas A., 1988. "The equity risk premium a solution," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 117-131, July.
- Karen E. Dynan, 1993. "How prudent are consumers?," Working Paper Series / Economic Activity Section 135, Board of Governors of the Federal Reserve System (U.S.).
When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-08g10020. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (John P. Conley)
If references are entirely missing, you can add them using this form.