Pessimistic beliefs under rational learning: Quantitative implications for the equity premium puzzle
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چکیده
منابع مشابه
Testing the Results of a Three-Agent OLG Rational Beliefs Model against the Equity Premium Puzzle
One of the most fervently debated topics in the financial economics of the last decade is the equity premium puzzle. In its simplest form, the equity premium puzzle affirms that the theoretically predictable maximum spread between return on equity and bonds (for “reasonable” parameters of risk aversion) is much lower than the actual observed value. This puzzle is a classic and consistent findin...
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Restrictions that a class of general equilibrium models place upon the average returns of equity and Treasury bills are found to be strongly violated by the U.S. data in the 1889-1978 period. This result is robust to model specification and measurement problems. We conclude that, most likely, an equilibrium model which is not an Arrow-Debreu economy will be the one that Simultaneously rationali...
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Recent tests of stochastic dominance of several orders proposed by Linton, Maasoumi and Whang (2003) are applied to reexamine the equity premium puzzle. An advantage of this nonparametric framework is that it provides a means to assess whether the existence of a premium is due to particular cardinal choices of either the utility function or the underlying returns distribution, or both. The appr...
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This paper studies the implications for general equilibnum asset pricing of a class of Kreps-Porteus nonexpected utility preferences characterized by a constant intertemporal elasticity of substitution and a constant, but unrelated, coefficient of relative risk aversion. It is shown that relaxing the parametric restriction on tastes imposed by the time-additive expected utility specification do...
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In this paper we argue that implementing the income in the utility function can considerably contribute to the explanation of the equity premium puzzle. Macroeconomic data from developed and developing countries provides support to this idea. We propose a utility function that includes consumption, income and disentangles dividends as a specific form of income, and price assets using a consumpt...
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ژورنال
عنوان ژورنال: Journal of Economics and Business
سال: 2006
ISSN: 0148-6195
DOI: 10.1016/j.jeconbus.2005.06.005