The Equity Premium in Retrospect

Mehra, & Prescott. (2003). The Equity Premium in Retrospect. Handbook of the Economics of Finance, Volume 1B: Financial Markets and Asset Pricing.

Type

Reference work

Intellectual base

Reference work

Year

2003

DOI

10.3386/w9525

Link

https://doi.org/10.3386/w9525

Cited by

1 citation across 1 artifact.

Domain-specific

• Equity premium puzzle
  • Because consumption growth in the postwar US has been both low in volatility and weakly correlated with stock returns, the model requires implausibly high risk aversion — published figures run from roughly 18, which satisfies the equity-premium condition alone, up to about 55 for proposals that also match the low risk-free rate, against the commonly assumed range of 1–10 — to match the observed premium

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