The equity premium puzzle and decreasing relative risk aversion
Agents are assumed to have a power risk aversion utility function in an otherwise standard asset-pricing model. When these preferences display decreasing relative risk aversion they are capable of eliminating one version of the equity premium and risk free rate puzzles.
Volume (Year): 2 (2006)
Issue (Month): 3 (May)
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Discussion Paper / Institute for Empirical Macroeconomics
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