Economic Theory Bulletin

, Volume 3, Issue 2, pp 213–222

Equity risk premium and insecure property rights

Research Article

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 

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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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