Book/Printed Material Rare events and the equity premium
About this Item
Title
- Rare events and the equity premium
Summary
- "The allowance for low-probability disasters, suggested by Rietz (1988), explains a lot of puzzles related to asset returns and consumption. These puzzles include the high equity premium, the low risk-free rate, the volatility of stock returns, and the low values of typical macro-econometric estimates of the intertemporal elasticity of substitution for consumption. Another mystery that may be resolved is why expected real interest rates were low in the United States during major wars, such as World War II. This resolution works even though price-earnings ratios tended also to be low during the wars. This approach achieves these explanations while maintaining the tractable framework of a representative agent, time-additive and iso-elastic preferences, complete markets, and i.i.d. shocks to productivity growth. Perhaps just as puzzling as the high equity premium is why Rietz's framework has not been taken more seriously by researchers in macroeconomics and finance"--National Bureau of Economic Research web site.
Names
- Barro, Robert J.
- National Bureau of Economic Research
Created / Published
- Cambridge, MA : National Bureau of Economic Research, c2005.
Headings
- - Rate of return--United States
- - Stocks--Prices--United States
- - United States--Economic conditions--20th century
Notes
- - Title from PDF file as viewed on 7/27/2005.
- - Includes bibliographical references.
- - Also available in print.
- - Mode of access: World Wide Web.
- - System requirements: Adobe Acrobat Reader.
Call Number/Physical Location
- HB1
Digital Id
- https://hdl.loc.gov/loc.gdc/gdcebookspublic.2005618477
- http://papers.nber.org/papers/W11310 External
Library of Congress Control Number
- 2005618477
Access Advisory
- Unrestricted online access
Online Format
- image