EconPapers    
Economics at your fingertips  
 

Red tape asset pricing

Thiago de Oliveira Souza ()
Additional contact information
Thiago de Oliveira Souza: Department of Business and Economics, Postal: University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmark, http://www.sdu.dk/staff/tsouza

No 8/2018, Discussion Papers of Business and Economics from University of Southern Denmark, Department of Business and Economics

Abstract: The equity premium–risk-free rate puzzle in standard consumption-based asset pricing models disappears once we remove the government-imposed component from the consumption expenditure series. I calibrate this component based on the growth rates of two proxies for government intervention, which I also show to forecast the short- and long-term equity premiums between 1974 (or 1981) and 2017. In summary, investors require large premiums to hold stocks because stocks give poor returns when government intervention increases, thereby systematically reducing individuals’ utility levels.

Keywords: Equity premium puzzle; intervention; regulation; risk (search for similar items in EconPapers)
JEL-codes: E10 G10 H10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-upt
Date: 2018-12-06
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.sdu.dk/-/media/files/om_sdu/institutte ... 8EDB597F2E724D39E61D Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:sdueko:2018_008

Access Statistics for this paper

More papers in Discussion Papers of Business and Economics from University of Southern Denmark, Department of Business and Economics Department of Business and Economics, University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmark. Contact information at EDIRC.
Bibliographic data for series maintained by Lene Holbæk ().

 
Page updated 2019-04-12
Handle: RePEc:hhs:sdueko:2018_008