Economic Theory Bulletin

, Volume 3, Issue 2, pp 213–222

Equity risk premium and insecure property rights

Research Article

DOI: 10.1007/s40505-014-0043-7

Cite this article as:
Magin, K. Econ Theory Bull (2015) 3: 213. doi:10.1007/s40505-014-0043-7
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Abstract

How much of the equity risk premium puzzle can be attributed to the insecure property rights of shareholders? This paper develops a version of the CCAPM with insecure property rights (stochastic taxes). The model implies that the current expected equity premium can be reconciled with a coefficient of relative risk aversion of 3.76, thus resolving a substantial part of the equity premium puzzle.

Keywords

CCAPM Equity premium Property rights Risk aversion Stochastic taxation 

JEL Classification

G1 H2 

Copyright information

© SAET 2014

Authors and Affiliations

  1. 1.The Center for Risk Management Research and Haas School of BusinessUniversity of California at BerkeleyBerkeleyUSA

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