An exploration of the effect of doubt during disasters on equity premiums
Shiba Suzuki
Economics Letters, 2014, vol. 123, issue 3, 270-273
Abstract:
In this note, we consider the effect on equity premiums of a representative household’s subjective expectations during disasters. In particular, we focus on the effect of doubt during disasters. We derive analytical solutions of equity premiums in the model of power utility function and conduct numerical exercises of the model of the recursive utility function. Our contribution is to demonstrate that doubt during disasters–even mild ones–generates high equity premiums.
Keywords: Subjective expectations; Disasters; Equity premium (search for similar items in EconPapers)
JEL-codes: G02 G12 (search for similar items in EconPapers)
Date: 2014
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Working Paper: An Exploration of the Effect of Doubt During Disasters on Equity Premiums (2013) 
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:123:y:2014:i:3:p:270-273
DOI: 10.1016/j.econlet.2014.02.010
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