Equity premium under multiple background risks
In a static Lucas's tree economy, we explore the effect of two types of background risk, uninsurable risk for labor income and miscalibrated risk for payoff distribution of risky asset, on the equilibrium price of the risky asset. Then we analyze the data of U.S. stock market and GDP growth rates during 1871-2004 to verify that our simple static model could provide appropriate magnitudes of equity premium.
Volume (Year): 30 (2010)
Issue (Month): 2 ()
|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.:
- Weil, P., 1991.
"Equilibrium Asset Prices with Undiversifiable Labor Income Risk,"
Harvard Institute of Economic Research Working Papers
1564, Harvard - Institute of Economic Research.
- Weil, Philippe, 1992. "Equilibrium asset prices with undiversifiable labor income risk," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 769-790.
- Philippe Weil, 1992. "Equilibrium Asset Prices With Undiversifiable Labor Income Risk," NBER Working Papers 3975, National Bureau of Economic Research, Inc.
- Merton, Robert C., 1980.
"On estimating the expected return on the market : An exploratory investigation,"
Journal of Financial Economics,
Elsevier, vol. 8(4), pages 323-361, December.
- Robert C. Merton, 1980. "On Estimating the Expected Return on the Market: An Exploratory Investigation," NBER Working Papers 0444, National Bureau of Economic Research, Inc.
- Harris Schlesinger & Christian Gollier, 2001.
"Changes in Risk and Asset Prices,"
CESifo Working Paper Series
443, CESifo Group Munich.
- Finn, M.G. & Hoffman, D.L. & Schlagenhauf, D.E., 1988.
"Intertemporal Asset-Pricing Relationships In Barter And Monetary Economies: An Empirical Analysis,"
UWO Department of Economics Working Papers
8805, University of Western Ontario, Department of Economics.
- Finn, Mary G. & Hoffman, Dennis L. & Schlagenhauf, Don E., 1990. "Intertemporal asset-pricing relationships in barter and monetary economies An empirical analysis," Journal of Monetary Economics, Elsevier, vol. 25(3), pages 431-451, June.
- Finn, M.G. & Hoffman, D.L. & Schlagenhauf, D.E., 1989. "Intertemporal Asset-Pricing Relationships In Barter And Monetary Economies: An Empirical Analysis," RCER Working Papers 208, University of Rochester - Center for Economic Research (RCER).
- Pindyck, Robert S., 1986.
"Risk aversion and determinants of stock market behavior,"
1801-86., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Pindyck, Robert S, 1988. "Risk Aversion and Determinants of Stock Market Behavior," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 183-90, May.
- Robert S. Pindyck, 1986. "Risk Aversion and Determinants of Stock Market Behavior," NBER Working Papers 1921, National Bureau of Economic Research, Inc.
- Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November.
- Klock, Mark & Phillips, Robert F, 1999. " A Model of Return Volatility with Application to Estimating Relative Risk Aversion," Review of Quantitative Finance and Accounting, Springer, vol. 13(3), pages 249-60, November.
When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-09-00690. 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.