THE RISK PREMIUM FOR EQUITY: IMPLICATIONS FOR RESOURCE ALLOCATION, WELFARE AND POLICY*

Simon Grant and John Quiggin

Australian Economic Papers, 2006, vol. 45, issue 3, 253-268

Abstract: Analysis of the equity premium puzzle has focused on private sector capital markets. The object of this paper is to consider the welfare and policy implications of each of the broad classes of explanations of the equity premium puzzle. As would be expected, the greater the deviation from the first‐best outcome implied by a given explanation of the equity premium puzzle, the more interventionist are the implied policy conclusions. Nevertheless, even explanations of the equity premium puzzle consistent with a general consumption‐based asset pricing model have important welfare and policy implications.

Date: 2006
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https://doi.org/10.1111/j.1467-8454.2006.00291.x

Related works:
Working Paper: The risk premium for equity: implications for resource allocation, welfare and policy (2004)
Working Paper: The risk premium for equity: implications for resource allocation, welfare and policy (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ausecp:v:45:y:2006:i:3:p:253-268

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