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. These preferences are shown to be capable of eliminating one version of the equity premium and risk free rate puzzles when they display decreasing relative risk aversion.
|Date of creation:||Feb 2005|
|Date of revision:|
|Contact details of provider:|| Postal: Maynooth, Co. Kildare|
Web page: http://www.maynoothuniversity.ie/economics-finance-and-accounting
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- Meyer, Donald J. & Meyer, Jack, 2005. "Risk preferences in multi-period consumption models, the equity premium puzzle, and habit formation utility," Journal of Monetary Economics, Elsevier, vol. 52(8), pages 1497-1515, November.
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in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 14, pages 889-938
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