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The Global Equity Premium Revisited: What Human Rights Imply for Assets’ Purchasing Power

Jędrzej Białkowski () and Ehud I. Ronn
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Jędrzej Białkowski: University of Canterbury, http://www.canterbury.ac.nz

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: In this paper, we argue that past computations equity risk premium did not properly account for the financial implications of political collapse on property, civil and human rights. Accordingly, we argue past calculations overstated the equity risk premium. In their stead, we argue a conservative lower bound is to set the value of equity to zero when confronted with the total absence of human, civil and property rights which negate the purchasing power of financial investments. In doing so, provide a valid lower-bound estimate of the equity risk premium that is corrected for lack of such basic rights, demonstrating the important changes in this estimate over time.

Keywords: Rare (“black swan”) events; Equity premium; International political crises; Property, civil and human rights; World War II; World equity index (search for similar items in EconPapers)
JEL-codes: G12 G15 (search for similar items in EconPapers)
Date: 2017-12-01
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http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/1719.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:17/19

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