The Spirit of Capitalism and the Equity Premium

Qin Wang, Yiheng Zou, Yu Ren () and Zhuo Huang ()
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Qin Wang: The Wang Yanan Institute for Studies in Economics, Xiamen University
Yiheng Zou: The Wang Yanan Institute for Studies in Economics, Xiamen University

Annals of Economics and Finance, 2015, vol. 16, issue 2, 493-513

Abstract: This paper evaluates whether the spirit of capitalism can explain the equity premium puzzle. The spirit of capitalism implies that investors acquire wealth not just for consumption, but also to improve their social status. We set up a consumption-based capital asset pricing model incorporating this component. The simulated results from our calibrated model match the mean and the volatility of the equity premium observed in the data.

Keywords: Spirit of capitalism; Consumption-based capital asset pricing model (search for similar items in EconPapers)
JEL-codes: E21 G12 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2015:v:16:i:2:wangzou

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