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The equity premium in The Netherlands: an analysis of 21 stock exchange securities based on the Campbell model

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  • H.J. de Wolff

Abstract

The equity premium is analysed for 21 indiviual firms who are listed at the Dutch stock market. The analysis is based on Campbell's model which explains the equity premium as a linear combination of the covariances between the returns and the residuals of state variables. The residuals are obtained by estimating a first order VAR. This method also takes into account the importance of human capital. The resulting equation has a multifactor form in line with arbitrage pricing theory. The degree of risk aversion is the important parameter in this equation. Estimation by means of the generalized method of moments gives plausible results for the degree of risk aversion.

Suggested Citation

  • H.J. de Wolff, 1998. "The equity premium in The Netherlands: an analysis of 21 stock exchange securities based on the Campbell model," WO Research Memoranda (discontinued) 555, Netherlands Central Bank, Research Department.
  • Handle: RePEc:dnb:wormem:555
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    More about this item

    Keywords

    equity premium; individual stock market firms; risk aversion;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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