IDEAS home Printed from https://ideas.repec.org/p/rsm/riskun/r04_8.html
   My bibliography  Save this paper

The risk premium for equity: implications for resource allocation, welfare and policy

Author

Listed:
  • Simon Grant

    () (Department of Economics, Rice University)

  • John Quiggin

    () (Department of Economics, University of Queensland)

Abstract

This paper describes experiences in the development and testing of three distinct financial models to support farm forestry decisions involving non-traditional tree species in northern Australia and in the Philippines. A variety of options were examined with respect to model design, yield prediction, computing platform, forestry performance criteria and other features. Two of the models focus on the forestry enterprise in isolation, while the third evaluates forestry within the context of the overall farm business. It is found that choice of model design depends on the particular type of application intended and availability of financial data for this application. Some complementarities were gained in replicating features when progressing from one model to the next. Model construction and testing were challenging tasks requiring considerable funds and for two of the models proceeding over a number of years. Validation involved the gradual gaining of confidence in a model as it progressed through various versions. For the more complex models, greater effort in development of the user interface was found to be warranted. The models have proved more suitable for use by extension agents than individual landholders. Even with major resource inputs into model development, a number of desirable additional features can be identified.

Suggested Citation

  • Simon Grant & John Quiggin, 2004. "The risk premium for equity: implications for resource allocation, welfare and policy," Risk & Uncertainty Working Papers WPR04_8, Risk and Sustainable Management Group, University of Queensland.
  • Handle: RePEc:rsm:riskun:r04_8
    as

    Download full text from publisher

    File URL: http://www.uq.edu.au/rsmg/WP/WPR04_8.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. John Y. Campbell & John H. Cochrane, 1994. "By force of habit: a consumption-based explanation of aggregate stock market behavior," Working Papers 94-17, Federal Reserve Bank of Philadelphia.
    2. Mehra, Rajnish & Prescott, Edward C., 2003. "The equity premium in retrospect," Handbook of the Economics of Finance,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 Elsevier.
    3. Andrew Atkeson & Christopher Phelan, 1994. "Reconsidering the Costs of Business Cycles with Incomplete Markets," NBER Chapters,in: NBER Macroeconomics Annual 1994, Volume 9, pages 187-218 National Bureau of Economic Research, Inc.
    4. Rajnish Mehra, 2003. "The Equity Premium: Why is it a Puzzle?," NBER Working Papers 9512, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kim, Sei-Wan & Krausz, Joshua & Nam, Kiseok, 2013. "Revisiting asset pricing under habit formation in an overlapping-generations economy," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 132-138.
    2. Siddiqi, Hammad, 2015. "Anchoring and Adjustment Heuristic: A Unified Explanation for Equity Puzzles," MPRA Paper 68729, University Library of Munich, Germany.
    3. John Quiggin, 2010. "Bad Politics Makes Bad Policy: The Case of Queensland's Asset Sales Programme," Economic Papers, The Economic Society of Australia, vol. 29(1), pages 13-22, March.
    4. Siddiqi, Hammad, 2015. "Anchoring Heuristic and the Equity Premium Puzzle," MPRA Paper 68537, University Library of Munich, Germany.
    5. Siddiqi, Hammad, 2016. "Anchoring and Adjustment Heuristic: A Unified Explanation for Asset-Return Puzzles," Risk and Sustainable Management Group Working Papers 229607, University of Queensland, School of Economics.

    More about this item

    Keywords

    equity premium puzzle; public investment;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H1 - Public Economics - - Structure and Scope of Government

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rsm:riskun:r04_8. 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: (David Adamson). General contact details of provider: http://edirc.repec.org/data/rsmuqau.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.