Explaining The Equity Risk Premium

A. Patrick Minford and Laurian Lungu ()

No 5017, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a simple overlapping generations model in which the young have a choice in investing in equities and index-linked bonds. Projections of share price uncertainty over a 30-year period show that the risk associated with such a long-term investment predicts an equity premium that matches historical values.

Keywords: Equity premium puzzle; risk premium (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2005-04
New Economics Papers: this item is included in nep-dge, nep-fin and nep-fmk
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Related works:
Journal Article: EXPLAINING THE EQUITY RISK PREMIUM* (2006)
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